Devaluation and income inequality: Evidence from Pakistan Report as inadecuate




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Abstract

The paper examines the impact of nominal devaluation on income distribution in Pakistan. In the empirical model we include economic growth, measured per capita; trade-openness; foreign direct investment FDI; unemployment and inflation rates which appear well justified in the particular context of the economy of Pakistan. The Auto Regressive Distributed Lag ARDL bounds testing approach to cointegration has been employed for the long run relation; and the Vector Error Correction Model VECM for the short run dynamics. We also test the Kuznets inverted-U relation between income inequality and economic growth. We find long run relationship among the series; and that nominal devaluation worsens income inequality. Though economic growth appears to deteriorate income distribution, the non-linear link between the variables depicts Kuznets’ 1955 type inverted-U relationship. This is reassuring for Pakistan in the long run. We also find FDI and trade-openness worsens income distribution. Inflation lowers income inequality but unemployment aggravates it in Pakistan.



Item Type: MPRA Paper -

Original Title: Devaluation and income inequality: Evidence from Pakistan-

English Title: Devaluation and Income Inequality: Evidence from Pakistan-

Language: English-

Keywords: Devaluation, Income Inequality, EKC, ARDL-

Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic DevelopmentF - International Economics > F3 - International Finance > F31 - Foreign Exchange-





Author: Muhammad, Shahbaz

Source: https://mpra.ub.uni-muenchen.de/35522/







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