Does an asymmetric nexus exist between exports and economic growth in Pakistan? Recent evidence from a nonlinear ARDL approach

A fundamental economic question is how nations can achieve long-term economic growth. One of the responses to this question is the export-led growth (ELG) hypothesis, which claims that rising exports are a key predictor of economic growth. In response, this study empirically investigates the asymmetric (nonlinear) and causal relationship between exports and economic growth using annual data from 1973 to 2020 in Pakistan. The asymmetric cointegration among variables is confirmed by the non-linear autoregressive distributed lag approach with a structural break. Long-term estimates conform to theoretical expectations, except for imports which are found to influence growth negatively. Further, human and physical capital both are positively contributing to economic growth. The major finding is that the effects of exports on economic growth are asymmetric, and economic growth in Pakistan reacts positively to the rise and fall of exports. The causality analysis supports the above findings and confirms a long-run asymmetric unidirectional causality from exports (with positive/negative change) to economic growth in Pakistan, clearly demonstrating the ELG hypothesis. From a policy perspective, the findings suggest that Pakistan should adopt and implement an export growth strategy to achieve economic prosperity as part of its development policy.