This study empirically analyses the impact of trade liberalization on economic prosperity in selected SAARC countries. To probe the nature of relationships between trade liberalization and economic prosperity especially in less develop countries, research carried out across five SAARC member countries: Pakistan, India, Nepal, Bangladesh and Sri Lanka. This study used the Fraser Trade Freedom Indices (FTFI) along with export of goods and services growth (XGSG) and import of goods and services growth (MGSG) as deputy of trade liberalization. To strengthen the research three different growth proxies, Gross Domestic Product Growth (GDPG), Gross Domestic Product Per capita Growth (GDPCG) and Gross National Income Growth (GNIG) are employed. For the time frame 2000 to 2012 with five cross a well appropriate panel data estimation technique Generalized Method of Moments/ Dynamic Panel Data (GMM/DPD) is employed to probe the outcomes. Results demonstrate that trade liberalization is conducive for economic prosperity in selected SAARC countries.
Interest in the detection of determinants of economic growth and discovery of their nature of relationships with economic growth has been long standing. It is imperative that higher economic activity leads towards higher level of national output and improved living standards. But with the induction of new thoughts, aged controversies went away, while indeed some new crept in. Topical research pinpoints the trade liberalization as a critical factor for economic well-being. What are the outcomes? Either positive or negative but accrual of trade obstruction is becoming a matter of concern with global implications. International trade has its unique importance, because protectionism and relaxation on trade directly or indirectly affects the global economy and occasionally generates the world economic crisis. It is observed that trade problems are born before the universal crises struck, so one cannot deny the unmatchable significance of commercial policy for economic growth in any economy. In spite of lot of controversies selection of appropriate trade strategy is considered one of the core objectives of any administration. In this era of globalization, world has shrunk into a global village and business activities of a country directly and indirectly depend upon rest of world for survival and economic strength.