Three-gap analysis of structural adjustment in Pakistan

This paper addresses two specific sets of questions. The first main questio n that has occupied a number of researchers is whether the adjustment progr ams (advocated by the World Bank and the International Monetary Fund) have had any positive effects to date on macroeconomic peformance (i.e., on expo rts, imports, savings, investment, consumption, and gross domestic product) in Pakistan. The second main question posed here is whether and to what ex tent external factors aggravated the adjustment process. The purpose of thi s study has accordingly been to provide systematic quantitative evidence on these fundamental questions, using 1970 to 1993 as the period of observati on. mle use a three-gap framework to explore the contributions to macroecon omic performance of the adjustment policy reforms and external shocks. The individual and collective effects of adjustment policies and external shock s are measured through a number of simulation experiments. The central find ing of the study is that in broad terms, the adjustment programs resulted i n a substantial improvement in macroeconomic performance of Pakistan's econ omy. Furthermore, the adverse effects associated with external shocks appea red to have been severe during the adjustment process. (C) 2000 Society for Policy Modeling. Published by Elsevier Science Inc.