IMPACTS OF TRADE DEFICIT ON THE ECONOMY OF PAKISTAN

Abstract

Abstract

Trade Deficit is one of serious issues which are noxious to the economy of Pakistan; trade deficit can be explicated like “when imports of a country exceed its exports”. The objective of present study is to investigate the impact of trade deficit on the economy of Pakistan by employing annually data for the period 1980 to 2017. The research study also takes the foreign direct investment (FDI) and inflation rate into the account; this study examined that how these variables have relationship with trade deficit. We employ the multiple regressions as a result of multiple independent variables and also used the least square method estimation technique. The research work resulted that one percent increase in foreign direct investment will decrease the trade deficit by 11.7546 percent that is one percent increase in GDP Growth will decrease trade deficit by 2.5221 percent, and one percent increase in exchange rate will increase the trade deficit by 1.0237 percent while one percent increase in inflation rate will increase the trade deficit by 3.3048 percent respectively.