How does Financial Development and Petroleum Price cause Trade Openness in Pakistan?

Abstract

In the past financial development and petroleum prices have been identified as acrucial factor influencing economic growth. This provoked us to explore the way financial development and petroleum prices influence the trade openness in Pakistan. The sample of yearly data is collected from 1980 to 2016 in order to apply ARDL cointegration method. Our results reflect the presence of long term cointegration between trade openness and its factors. This suggest that with the rise in credit in private sector there is eventual impact on imports and exports whereas the international petroleum prices also impact the same by pushing the prices of goods. Hence it is recommended that hedging the oil prices and the expansion of credit in Pakistan is worthwhile in terms of trade openness.