The Role of Export Performance and Capital Accumulation in Driving Industrial Success in Pakistan: An Empirical Assessment

Abstract

This study investigates the imperative role of export performance in driving industrial success in Pakistan. The expansion in industrial production is an essential indicator for representing economic strength while contraction in industrial production demonstrates economic weakness of a country. After considering ARDL bounds test over a period of 1981 to 2023, long run cointegrating relation between industrial production and export performance is confirmed. The empirical results suggest that expansion in exports value index significantly accelerates industrial production in long and short term in Pakistan. This confirms the evidence of export-led-industrial success hypothesis in Pakistan. The findings further reveal that capital accumulation also expands industrial production in both periods while money supply leaves its positive impact on industrial production only in long run. This research suggests that government may take certain steps in expanding exports; size of capital and quantity of money in a way that their expansionary effects are larger than their opportunity cost.