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Journal of Management Sciences - Volume 2, Issue 1 2015
By Muhammad Maqbool-ur-Rahman
10.20547/jms.2014.1502103
Keywords: Economic growth, globalization, integration, gross fixed capital formation, total labor
The study uses overall index of globalization developed by \cite{dreher2006does} in which all three types of integration were utilized such as political, economic and social integration. The data of three south Asian countries like Pakistan, India and Bangladesh were taken for the period from 1981 to 2011. Initially, stationary properties of selected variables were checked through conventional unit root tests such as Augmented Dickey Fuller (ADF) and Phillip Perron (PP) test followed by ordinary least square (OLS), granger causality is applied and finally long-run relationship among variables were confirm by employing Johansen test of cointegration i.e. trace test and max-Eigen test. The study has very good model explaining variance in GDP growth. Probability value of F-stat is less than 0.05 which recognize that all the independent variables are regarded good to forecast the changing in dependent variable. The outcomes of Durbin Watson tests state that there is no autocorrelation in the chosen variables. Coefficients of independent variables are positive and significant. The outcomes of Johansen test of cointegration established a long-run equilibrium associationship among economic variables. It is clear that globalization and GDP both influence each other and illustrates bidirectional causality in India while Pakistan and Bangladesh show unidirectional causality between globalization and GDP. It is statistically found that overall index of globalization may affect the rate of growth. It has been recommended that authorities and government should realize the importance of globalization as factor of growth and concentrate on their weak component of globalization besides economic integration.