Pakistan, Growth, Dependency, and Crisis

Abstract

Compared to the historical and even contemporary experience of India, Pakistan has long been regarded as a “dependent” economy. Gross domestic product growth in Pakistan is typically argued to be contingent on external factors: trade, financial flows, and the interdependence of asset markets. Beyond the rhetoric, there is only ambiguous and contradictory empirical evidence to support this view. This paper offers a new methodology, that of case studies of growth and stagnation, to test the hypothesis of dependency. The results show that growth in Pakistan is influenced by external factors, but that growth is driven primarily by the dynamics of the domestic economy.