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E3 Journal of Business Management and Economics

E3 Journal of Business Management and Economics Vol. 5 (1) pp. 001-008, January 2014; © E3 Journals; ISSN 2141-7482

The impact of financial openness, trade openness on macroeconomic volatility in Pakistan: ARDL Co Integration approach

Hira Mujahid1 * , Shaista Alam1
1 Applied Economics Research Center, University of Karachi, Karachi-75279, Pakistan
*Corresponding Author E-mail:
Accepted 17 December 2013


The purpose of this paper is to investigate the relationship between trade openness, financial openness and macroeconomic volatility in Pakistan. For this purpose, time series data from 1970-2010 and ARDL co integration technique was used to find the long run relationship. The results proposed that in the long run, trade openness generates volatility in output and investment, whereas financial openness has significant effect only on investment volatilities. Furthermore, the error correction model suggested that in the short run, trade and financial openness significantly affect output, consumption and investment volatilities.

Keywords: Macroeconomic Volatility, Trade openness, financial openness, Consumption, Investment

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