Effects of Major Exports and Imports on the Balance of Foreign Trade in Pakistan

Master Thesis

Effects of major exports and imports on the balance of foreign trade in Pakistan.

Author Muhammad Shair Ali Supervisor Mats Hagnell

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Abstract
This thesis focuses on the econometric evaluation of the effects of major exports and imports on the balance of foreign trade in Pakistan. Various statistical techniques at our disposal have been used such as principal component analysis, stepwise regression and multiple linear regression. Attempt has been made to look out for the stationarity in the data for the balance of trade in Pakistan. Augmented Dickey Fuller test has been used for this purpose. The techniques have been applied to the balance of trade, more specifically exports and imports from 1972 till 2005. The gap between imports and exports is continuously increasing, which leads us to conclude that we do not see any stationarity in the balance of trade in the long run.

Keywords: Principal Component Analysis, Regressions, Unit Root Test

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Table of Contents
1. Introduction.........................................................................4 2. Data, Methodology and Techniques ..................................7 2.1 Data ............................ .............................................7 2.2 Methodology.............................................................8 3. Analysis of the data and results ........................................11 3.1 Principal Component Analysis ...............................11 3.2 Stepwise Regression ...............................................16 3.3 Multiple Linear Regression ....................................17 3.4 Time series Model for Balance of trade .................18 4. Summary and Results .......................................................27 5. References .........................................................................29 Appendices ........................................................................30 Appendix1: Principal component...