Impact of Institutional Quality on Trade Performance of Small and Medium Enterprises in Pakistan

Muhammad Fahad Khan, Muhammad Imran Khan, Kamran Abbas Naqvi
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Abstract

The trade economy is dependent upon the institutional quality of the country. It affects the ease of doing business in the economy. It is plausible to think that, how institutional quality can affect the trading performance of Pakistan. Small & medium enterprises (SMEs) are playing the role of the backbone of the trade sector in Pakistan. Contribution SMEs can be significantly improved, by improving the supporting macroeconomic indicators. This paper studies the short-run and the long-run association between SME trade growth and cost of production, relative prices, and Institutional quality in Pakistan. It also examines the Environmental Kuznets curve (EKC) hypothesis, between SME trade growth and institutional quality in Pakistan. This study utilizes secondary data, which is taken from multiple secondary sources, including the SMEDA, Pakistan Economic Survey, and world development indicators. The biannual data is assembled up for 38 observations from (2000 to 2019). This study uses Auto Regressive Distributive Lag (ARDL) bound testing method to examine the short run and long run connections between SMEs’ trade growth and macro-economic variables, like; relative prices, Cost of production. Gross Domestic Product, exchange rate, and institutional quality. These variables are selected from the available literature. The study finds that the short-run response of SMEs trade is not significant, but it significantly responds to macro-economic indicators in long run. The institutional quality has a non-linear relationship with SMEs trade growth. This indicates that the pollution heaven hypothesis holds valid even for the case of institutional quality and SMEs trading performance. The study focuses on the optimality of institutional quality for the optimal performance level of SMEs in Pakistan.
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制度质量对巴基斯坦中小企业贸易绩效的影响
贸易经济依赖于国家的制度质量。它会影响经济中做生意的便利性。我们有理由认为,制度质量如何影响巴基斯坦的贸易表现。中小企业(SMEs)在巴基斯坦的贸易部门中扮演着中坚力量的角色。通过改善配套宏观经济指标,可以显著提高中小企业的贡献。本文研究了巴基斯坦中小企业贸易增长与生产成本、相对价格和制度质量之间的短期和长期关系。本文还考察了巴基斯坦中小企业贸易增长与制度质量之间的环境库兹涅茨曲线假设。本研究使用的二手数据来自多个二手来源,包括SMEDA、巴基斯坦经济调查和世界发展指标。一年两次的数据是由2000年至2019年的38次观测收集的。本文采用自回归分布滞后(ARDL)约束检验方法,考察了中小企业贸易增长与宏观经济变量之间的短期和长期关系。相对价格,生产成本。国内生产总值、汇率和制度质量。这些变量是从现有文献中选择的。研究发现,中小企业贸易的短期响应不显著,但长期对宏观经济指标的响应显著。制度质量与中小企业贸易增长呈非线性关系。这表明污染天堂假说即使在制度质量和中小企业交易绩效的情况下也成立。研究的重点是巴基斯坦中小企业最优绩效水平的制度质量的最优性。
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