32 Paradigms: A Research Journal of Commerce, Economics and Social Sciences ISSN 1996-2800, 2013, Vol. 7, No. 1, pp. 37-47. IMPACT OF TRADE OPENNESS AND MACROECONOMIC VARIABLES ON GDP GROWTH OF PAKISTAN ** MUHAMMAD RAMZAN †† MUHAMMAD ASIF MUHAMMAD MUSTAFA Faculty of Commerce, University of Central Punjab, Lahore, Pakistan ABSTRACT This study is about the impact of trade openness and selected macroeconomic variables on economic growth of Pakistan. Economic growth of Pakistan is measured interms of annual nominal GDP growth rate. Trade openness, employment rate, exchange rate, foreign direct investment and inflation rate are taken as independent variables in this study. Augumanted Dickey Fuller (ADF) test is applied to check unit root problem, which is not found in the data. Johansen Co-integration test is used and reuslts of all the variables are significnat, indicating that there exists long term relationship among the variables. Ordinary Least Square (OLS) method is then applied to check the causal effect of exogenous variables. Results show that all variables are co- integrated at 5% level of significance. Keywords: Trade Openness; Exchange Rate; Foreign Direct Investment; Economic Growth; Co-integration. INTRODUCTION Most of the developed and developing countries have access to international markets through multilateral trade. Pakistan being a developing country and facing many other problems like policy issues, poor governance, policy implementation, terrorism, corruption, lawlessness, unskilled labor, obsolete technology and poverty, does not find herself in a very comfortable position in the era of globalization. The concept of world being a global village refers to the ease of trade in various countries. International trade in the global village depends on various factors such as labor cost, technology, availability of other factors of production and economic activity in each country. This multilateral trade is also due to easing ** The views or opinions expressed in this manuscript are those of the author(s) and do not necessarily reflect the position, views or opinions of the editor(s), the editorial board or the publisher. †† Corresponding author