Determinants for the Demand and Supply of Textile Exports of Pakistan 

2013:95

This study analyses the demand and supply side determinants of textile and garments’ exports of Pakistan using time series data for the period 1972– 2010. Eight trading partners (US, UK, Canada, Italy, France, Japan, Spain and UAE) contributing major share in this trade have been selected for analysis. The demand and supply side factors have been examined using the simultaneous equation approach and the Generalised Method of Moment to handle the simultaneous equation bias. The results reveal that the income of the trading partners has an important and significant role in determining performance of textile and clothing exports of Pakistan. The relevance of devaluation policy in accelerating demand for this export has been found to be comparatively small. On the supply side, the relative prices and the capacity variable are important. The results of the exports supply equation show that the removal of quantitative restrictions does not provide any incentive to the suppliers. However, the real wages in the textile sector have a significant but small effect on the supply. The demand for textile and clothing products of Pakistan is relatively high in UK, UAE, Italy and USA (as indicated by high income elasticities), therefore, factors that help in the expansion of textile and clothing products in the local market and the marked countries should receive special attention of the policy makers.