Dutch Disease as an impediment to Economic Growth of Pakistan

Abstract

This paper focuses on assessing the impact of Dutch Disease on economic growth of Pakistan. In the first step, Dutch Disease is detected and then examines its link with economic growth. Annual time series data from 1981 to 2016 is used for analysis from World Development Indicators (2016). Generalized Method of moment (GMM) is used for estimation as it addresses the endogeneity and hetroscadasticity problems in the data. The estimation of Dutch Disease at an aggregate and sector level provide evidence for hindrances to economic growth in Pakistan which is the main objective of the study. The results showed that Dutch disease is harmful for industrial sector which impede output and employment generation process and hence economic growth.

Keywords

• Foreign inflow
• Economic growth
• Real exchange rate
• total factor productivity