Long-run trend, Business Cycle & Short-run shocks in real GDP

Gross domestic product may be considered, a combination of three processes viz., long-run trend, business cycles and short-run shocks. The series of GDP can be decomposed in to its three components by using some statistical method. Such a decomposition of real GDP of Pakistan reveals that the Pakistan’s economy has a declining growth in long-run trend since early 1980s that however, is expected to start rising in 2001-02. Pakistan is also facing a recessionary phase of third business cycle, which is expected to end in 2004-05.