AN EMPIRICAL INVESTIGATION OF PAKISTAN’S BILATERAL TRADE WITH INDIA AND SRI LANKA: A GRAVITY MODEL APPROACH
Keywords:
International Trade, South Asian Free Trade Agreement, Gravity ModelsAbstract
This paper empirically investigates the effect of various trade-related macroeconomic variables, regional trade agreements and common border effects on overall trade of Pakistan, India, and Sri Lanka. The study utilizes trade data for the period of 1985-2015 to assess the bilateral trade aspects through the use of extended gravity equation. The empirical findings are consistent with the gravity model estimates conducted by earlier studies with mild deviances experienced due to the sensitive items lists and geo-political dynamics prevailing in the region. Overall, the results reflect that the mass of the trading partner, distances, existence of regional trade agreements and common borders are significant while analyzing trade flows among trading partners. These findings are of utmost importance in the context of trade route initiatives by Asia in general, and Pakistan’s newly appointed political leadership in particular.References
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microeconomic foundations and empirical evidence. The Review
of Economics and Statistics, 474-481.
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Business Cycles and Trade. In 2018 Meeting Papers (No. 1259).
Minneapolis: Society for Economic Dynamics.
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the impact of enlargement. Economic Systems, 25(3), 183-214.
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large as commonly thought. Oxford Bulletin of Economics and
Statistics, 69(4), 473-496.
Egger, P. (2008). On the role of distance for bilateral trade. World
Economy, 31(5), 653-662.
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United Kingdom: Bloomsbury Publishing.
Filippini, C., & Molini, V. (2003). The determinants of East Asian trade flows: a
gravity equation approach. Journal of Asian Economics, 14(5), 695-711.
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at all times (No. w7338). National Bureau of Economic Research.
Gaulier, G., Lemoine, F., & Deniz, Ü. K. (2007). China’s emergence and
the reorganisation of trade flows in Asia. China Economic
Review, 18(3), 209-243.
Iwanow, T., & Kirkpatrick, C. (2007). Trade facilitation, regulatory quality,
and export performance. Journal of International Development: The
Journal of the Development Studies Association, 19(6), 735-753.
Kumar, S., & Ahmed, S. (2015). Gravity model by panel data approach:
An empirical application with implications for South Asian
countries. Foreign Trade Review, 50(4), 233-249.
Martínez-Zarzoso, I., & Suárez-Burguet, C. (2005). Transport costs and
trade: empirical evidence for Latin American imports from the
European Union. Journal of International Trade & Economic
Development, 14(3), 353-371.
Nitsch, V. (2000). National borders and international trade: evidence from
the European Union. Canadian Journal of Economics/Revue
canadienne d’économique, 33(4), 1091-1105.
Schiff, M., & Winters, L. A. (2003). Regional integration and
development. Washington DC: The World Bank.
Sultan, M., & Munir, K. (2015). Export, Import, and Total Trade Potential
of Pakistan: A Gravity Model Approach. Munich, Germany:
University Library.
Tinbergen, J. (1963). Shaping the world economy. The International
Executive, 5(1), 27-30.
Weerakoon, D., & Thennakoon, J. (2008). The South Asian Free Trade
Agreement: Which Way Forward? Journal of South Asian
Development, 3(1), 135-149.
Xuegang, C. (2008). Study on Xinjiang’s bilateral trade using a gravity
model. Asia Europe Journal, 6(3-4), 507-517.
Study of the India–Sri Lanka Free Trade Agreement. Journal of
Business Thought, 7, 18-34.
Baier, S. L., & Bergstrand, J. H. (2001). The growth of world trade: tariffs,
transport costs, and income similarity. Journal of International
Economics, 53(1), 1-27.
Baier, S. L., & Bergstrand, J. H. (2007). Do free trade agreements actually
increase members’ international trade? Journal of International
Economics, 71(1), 72-95.
Baldwin, R. E. (1994). Towards an integrated Europe (Vol. 25, No. 234).
London: Centre for Economic Policy Research.
Baltagi, B. H., Egger, P., & Pfaffermayr, M. (2003). A generalized design
for bilateral trade flow models. Economics Letters, 80(3), 391-397.
Bergstrand, J. H. (1985). The gravity equation in international trade: some
microeconomic foundations and empirical evidence. The Review
of Economics and Statistics, 474-481.
Bhattarai, S., & Kucheryavyy, K. (2018). A Unified Model of International
Business Cycles and Trade. In 2018 Meeting Papers (No. 1259).
Minneapolis: Society for Economic Dynamics.
Buch, C. M., & Piazolo, D. (2001). Capital and trade flows in Europe and
the impact of enlargement. Economic Systems, 25(3), 183-214.
Bun, M. J., & Klaassen, F. J. (2007). The euro effect on trade is not as
large as commonly thought. Oxford Bulletin of Economics and
Statistics, 69(4), 473-496.
Egger, P. (2008). On the role of distance for bilateral trade. World
Economy, 31(5), 653-662.
Frankopan, P. (2017). The silk roads: A new history of the world. London:
United Kingdom: Bloomsbury Publishing.
Filippini, C., & Molini, V. (2003). The determinants of East Asian trade flows: a
gravity equation approach. Journal of Asian Economics, 14(5), 695-711.
Frankel, J. A. (1999). No single currency regime is right for all countries or
at all times (No. w7338). National Bureau of Economic Research.
Gaulier, G., Lemoine, F., & Deniz, Ü. K. (2007). China’s emergence and
the reorganisation of trade flows in Asia. China Economic
Review, 18(3), 209-243.
Iwanow, T., & Kirkpatrick, C. (2007). Trade facilitation, regulatory quality,
and export performance. Journal of International Development: The
Journal of the Development Studies Association, 19(6), 735-753.
Kumar, S., & Ahmed, S. (2015). Gravity model by panel data approach:
An empirical application with implications for South Asian
countries. Foreign Trade Review, 50(4), 233-249.
Martínez-Zarzoso, I., & Suárez-Burguet, C. (2005). Transport costs and
trade: empirical evidence for Latin American imports from the
European Union. Journal of International Trade & Economic
Development, 14(3), 353-371.
Nitsch, V. (2000). National borders and international trade: evidence from
the European Union. Canadian Journal of Economics/Revue
canadienne d’économique, 33(4), 1091-1105.
Schiff, M., & Winters, L. A. (2003). Regional integration and
development. Washington DC: The World Bank.
Sultan, M., & Munir, K. (2015). Export, Import, and Total Trade Potential
of Pakistan: A Gravity Model Approach. Munich, Germany:
University Library.
Tinbergen, J. (1963). Shaping the world economy. The International
Executive, 5(1), 27-30.
Weerakoon, D., & Thennakoon, J. (2008). The South Asian Free Trade
Agreement: Which Way Forward? Journal of South Asian
Development, 3(1), 135-149.
Xuegang, C. (2008). Study on Xinjiang’s bilateral trade using a gravity
model. Asia Europe Journal, 6(3-4), 507-517.
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Published
2019-07-15
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