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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
JANURAY 2011
VOL 2, NO 9
Table 5: Granger causality test results between LnNYt, LnHt LnMXt, LnSMXt and LnPXt
based on the Toda- Yamamoto procedure
Dependent Modified Wald-Statistics
Variable LnNYt LnHt LnMXt LnSMXt LnPXt
LnNYt --- 10.3451 5.5750 3.0248 2.8738
(0.0158) (0.0601) (0.3878) (0.4115)
LnHt
7.0123 --- 1.7577 13.5052 1.8696
(0.0715)
(0.6224) (0.0037) (0.5999)
LnMXt 2.1783 1.6956 --- 7.2124 3.4090
(0.5362) (0.6379)
(0.654) (0.3328)
LnSMXt 1.4631 1.1236 1.3278 --- 1.9615
(0.6908) (0.7714) (0.7225)
(0.5804)
LnPXt 8.4713 4.4001 2.3941 13.7113 ---
(0.0372) (0.2214) (0.4947) (0.0033)
Note: Probability values are given in parentheses.
6. Summery and Conclusion
The study has attempted to provide empirical evidence concerning the relationship
between composition of exports, human capital and economic growth. The empirical analysis
was based on Johanson‘s cointegration, parsimonious ECM and causality based on Toda and
Yamamoto (1995) procedure for Pakistani time series data from 1972 to 2005. In the
production function framework, total factor productivity was assumed to be a function of
manufactured, semi-manufactured, primary exports and capital goods imports. The output
variable of the function was defined net of exports to separate the influence of exports on
output that incorporated into the national income identity.
The findings can be summarized as follows:
i. ADF test indicates that all variables are non-stationary at their level form and become
stationary at their first difference.
ii. Johanson‟s cointegration test indicates that there exists a long-run relationship
between Economic Growth, Physical Capital, Labor, Human Capital, Manufacturing
exports, semi-manufacturing exports and primary exports.
iii. The results of short run dynamic ECM parsimonious model suggest that human capital
is significant in enhancing economic growth while all components of total exports are
not led to increase economic growth except manufacturing exports. The results of short
run dynamic ECM model suggest that both human capital and manufacturing exports
are the engine of economic growth for Pakistan.
iv. Granger Causality test based on Toda and Yamamoto procedure indicates that there is
unidirectional causality running from manufacturing exports to net income, net income
to human capital, semi-manufacturing exports to human capital, semi-manufacturing
exports to primary exports and net income to primary exports. And no evidence of bi-
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