Uncertainty and Risk Analysis of Pakistan's Regional Trade: Fan Chart Approach

Research Article

Economic forecasting, both specific and general, is a crucial part of economic planning for a country. It is required to effectively deal with uncertainity as well as possible negative impact of proposed policies in future. Therefore, correct predictions will improve the effectiveness of the decision-making process. This study is a pioneering attempt to forecast aggregate and regional trade of Pakistan by using annual time series data from 1974 to 2014. With the help of fan chart, aggregate and regional trade of Pakistan have been forecast from 2015 to 2020. Fan chart provides ranges of forecast at different levels of significance as well as assesses. The risk associated with the forecast value, namely upside and downside risk. The results suggest that there is considerable uncertainty associated with the regional trade of Pakistan. The policy makers are suggested to monitor downside risk associated with the exports and upside risk associated with the imports of the country.

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