Relationship between Globalization and Economic Prosperity: The Case of Pakistan

Abstract

The study aims to highlight whether globalization, especially for a developing country like Pakistan has a positive correlation with economic growth. By looking at the history we can see both the positive and negative effects of globalization for underdeveloped countries. Expansion of trade and global investment have propelled growth and moved several low income countries to middle income status but at the same time, many groups in these countries have left behind. In this modern era, for a developing country to be able to compete with the developed nations it has to adopt various globalization paths to ensure the prosperity of its economy. In case of Pakistan, we can see the evidence of mentoring the economic direction of the country, there has been an increase in growth in terms of per capita income and education but the country has lacked the sight of development in terms of trade due to the unprecedented rising imports and declining exports in the country. The data set has been extracted from the World Bank Indicators and economic survey for Pakistan from 1990-2020. It is a time series study on a country level. Vector error correlation model (VECM) confirms that globalization has a significant long-term correlation with economic growth in Pakistan. The model is also consistent with the Economic Theory.