Impact of trade l1beralisation on production, Income distribution and on balance of trade in Pakistan: a counterfactual analysis using a computable general equilibrium model

Pakistan initiated structural adjustment reforms since 1980 as advocate by International Monetary Fund (IMF) and World Bank (WB) and trade liberalisation remains an important part of such reform policies. Most of the studies have focused their attention on individual elements of trade liberalisation such as devaluation by using econometric techniques. Similarly still others have used a "compactor country" approach to assess the macroeconomic impact of adjustment programmes. However this approach requires each country to have similar economic structure and a same external environment. It also requires that each country exhibit highly similar performance in the pre-adjustment period. Satisfying both of these requirements in practice would seem a difficult and necessarily problematic task. (Mark McGILLIVRA Y 1995). Moreover these studies fail in taking into account the general equilibrium effects of a policy change on different sectors of the economy. In general there is a lack of adequate quantitative methodology to .assess the impact of liberalisation with particular focus on trade liberalisation and its economy wide impacts. A general equilibrium framework is therefore required to capture the impact of trade liberalisation on different sectors of the economy. This study presents a Computable General Equilibrium(CGE) model for Pakistan that will be used for more detailed analysis of such policies.