Impact of Trade Liberalization on the Government Consumption Expenditures of Pakistan

Abstract

This study has investigated the trade openness impact on the government consumption expenditures of the Pakistan. This has utilized Vector Error Correction Model (VECM) for statistical analysis. The results show that increase in trade liberalization leads to increase in the government consumption expenditures and proves the Rodrik (1998) and Cemaron (1978) compensation hypothesis in Pakistan. This result concludes that Pakistan government consumption expenditures reduce volatility and risks which creates through the trade liberalization.