NON-LINEAR INSIGHTS INTO TRADE LIBERALIZATION AND ECONOMIC GROWTH: EVIDENCE FROM PAKISTAN

Abstract

The role of trade liberalization in promoting economic growth is well acknowledged, though its effects vary across different economies. This study investigates the impact of trade liberalization on Pakistan’s economic growth from 2001 to 2024, incorporating key control variables such as foreign direct investment (FDI), remittances, gender development, and governance effectiveness. Employing a Kernel-based Regularized Least Squares machine learning approach, the analysis captures non-linear and complex relationships that traditional linear econometric methods often overlook. Findings indicate that trade liberalization, alongside FDI, remittances, gender development, and governance effectiveness, exerts a significant positive influence on economic growth. Notably, the results reveal a non-linear relationship, suggesting that excessive liberalization may become counterproductive. The study underscores that while enhancing trade liberalization can boost economic performance, it must be implemented judiciously to ensure sustainable and long-term economic stability for Pakistan.