This document presents the theoretical framework and methodology for a study examining the relationship between economic growth and imports in Pakistan. It outlines the model specification, hypotheses, variable definitions, data collection sources, empirical evidence, and conclusions. The study finds a positive relationship between economic growth and total imports, but a negative relationship between growth and capital imports, suggesting capital imports represent an outflow of cash from the domestic to foreign economy. Overall, the study concludes that while imports may harm domestic industries, they can still contribute to increased overall economic growth for a country.

3.  Amer Abbas
 Ghulam Abbas
 M.Adil Maqsood
 Kaleem Ullah
 Israr Ahmed

4. THEORETICAL FRAMEWORK
Introduction
 This chapter deals with the mechanics of the problem
under investigation. Therefore, it deals with the research
site, the study procedures, theoretical framework, and
specification of model and definition of variables.
 METHODOLOGY.
 The theoretical relationship between imports and
economic growth tends to be more complicated than that
between exports and growth. The demand for imports is
determined by both economic and non-economic factors.

5.  The purpose of this study is to provide an empirical test of
the causal relationship between economic growth and
imports, especially categories of imports, which are
investment goods imports, raw material imports,
consumption goods imports and other goods imports.
 The focus is Pakistan because recently Pakistan has lived
an economic growth with a large current deficit. So, it is
wondered if an economic growth causes an increase in
imports or import expansion causes the economic growth.

6.  This paper differs from the previous studies in that way; import is
decomposed to determine the dynamic relationship between
import categories and economic growth, comparing with the
relationship between total import and economic growth.

7. Model specification
 Y=F (L, K, X)
 Y stands for GDP
 L and K respectively stand for the input of labour and capital
factors
 X stands for the amount of imports and actually it is a variable
added to original production function.
 Labour force, capital and GDP is not a linear relation but an
exponential relation, but it can be translated into linear
relation by taking logarithm and a specific model of multiple
linear regression is as follows:
 Y= β0 + β1L + β2K + β3X +μ

8. HypothesesHypotheses # 1
 H0: Reject
 HA: Accept
 H0: There is no significant relationship between GDP and
Labour.
 HA: There is significant relationship between GDP and Labour.
Hypotheses # 2
 H0: Reject
 HA: Accept
 H0: There is no significant relationship between GDP and
CAPITAL.
 HA: There is significant relationship between GDP and
CAPITAL.

9. Hypotheses # 3
 H0: Accept
 HA: Reject
 H0: There is significant relationship between GDP and
IMPORTS.
 HA: There is no significant relationship between GDP and
IMPORTS.

10. DEFINITION OF VARIABLES
 GDP growth
 The market value of final goods and services newly produced
with in a nation’s boundaries during a fixed period of time.
The GDP growth is the dependent variable because it has
influence by the other variable.
 Labour
 The aggregate of all human physical and mental effort used in
creation of services. Labor is a primary factor of production.
The size of a nation'slabor force is determined by the size of its
adult population, and the extent to which the adults are either
working or are prepared to offer their labor for wages.

11.  Capital
 Factors of production that are used to create goods or
services and are not themselves in the process, like
machines.
 Imports
 The term import is derived from the conceptual
meaning as to bring in the goods and services into
the port of a country, it include imports of the
primary products like raw material.

12. DATA COLLECTION METHODS AND
SOURCES
 Data for this study is collected from secondary sources
like; books, report and internet. The data collected is given
a proper setup with the help of applying research tools and
procedures.
 To obtain secondary data the sources like web- site and
publications of state bank of Pakistan, journals and
website of ministry of finance, and federal bureau of
statistics, library books and IFS etc.

13. Empirical evidence
 Y=β0 + β1L + β2K + β3X +μ
 Y= -25587.93+2049.112L-0.028932K+1.067639X
 Interpretation
 Dependent variable = GDP
 Independent variable = CAPITAL, LABOUR AND IMPORTS
 β0 = Intercept
 β1= coefficient of labour.
 β2= coefficient of capital.
 β3= coefficient of imports.
 Values of
 β0 =-25587.93
 β1= 2049.112
 β2= -0.028932
 β3= 1.067639

14.  1% increase in labour leads to 2049.112% increase in
GDP; by taking other factors are constant, and we say
that there is positive relationship between labour and
GDP, And 1% increase in capital leads to -0.028932%
decrease in GDP, we say that there is negative
relationship between capital and GDP,And 1%
increase in imports leads to 1.067639% increase in
GDP,and there is positive relationship between
imports and GDP

15. Ols estimation
Dependent Variable: GDP
Method: Least Squares
Date: 05/28/12 Time: 08:55
Sample: 1980 2007
Included observations: 28
Variable Coefficient Std. Error t-Statistic Prob.
C -25587.93 3152.315 -8.117186 0.0000
L 2049.112 109.2836 18.75040 0.0000
IMP 1.067639 0.364938 2.925539 0.0074
CAPITAL -0.028932 0.029335 -0.986238 0.3339
R-squared 0.989750 Mean dependent var 60045.18
Adjusted R-squared 0.988468 S.D. dependent var 21932.52
S.E. of regression 2355.234 Akaike info criterion 18.49823
Sum squared resid 1.33E+08 Schwarz criterion 18.68855
Log likelihood -254.9752 Hannan-Quinn criter. 18.55641
F-statistic 772.4609 Durbin-Watson stat 0.831716
Prob(F-statistic) 0.000000

16. CONCLUSIONS
 The aim of this study is to check the impact of
imports on economic growth. In this study we find
that there is positive relationship between economic
growth and imports. One percent increase in the real
GDP due to 1.69 % increase in imports. There is
negative relationship between economic growths
and capital to the imports, it means the capital is
imports from the foreign countries the cash is
outflow from domestic to foreigner. This means that
there is negative relationship between the imports of
capital and economic growth.

17.  Finally the study conclude that the imports are the
harmful for the domestic industries the reason is that
increase the supply of goods the domestic
consumption is shift and demand for the foreign
goods are increase. But in a country the overall growth
performance is increase.

18. REFERENCES