Determinants of Total Factor Productivity in Pakistan

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This paper tries to highlight the effect of fiscal policy, monetary policy and other economic measures on TFP in Pakistan. Analyzing TFP in Pakistan by using recent data is important for two reasons. First, in the past few years, Pakistan has been experiencing very high growth in the region and it is important to know the latest growth accounting. Secondly, the Pakistan government has implemented many wide ranging economic reforms. These include reforms in exchange rate, interest rate as well as fiscal and monetary reforms since 1999- 2000. It is important to know how these macro policy reforms have impacted TFP. These reforms are implemented with different vigor in different sectors therefore, the investigation of sector wise productivity is quite essential in order to explain the fluctuations of overall economic growth. The remaining paper is organized as follows: Section 2 reviews existing literature on the determinants of TFP; Section 3 explains the methodology used in the study; Section 4 discusses the trends in TFP and Section 5 highlights the contribution of determinants of TFP. Finally, Section 6 provides the policy implications of the results.