IDEAS home Printed from https://ideas.repec.org/a/ase/jgpgta/v7y2018i2p71-84id248.html
   My bibliography  Save this article

Free Trade Agreements and International Trade Flow of Pakistan: the Gravity Modelling Approach

Author

Listed:
  • Shujaat Abbas

Abstract

This study explores the effect of regional and bilateral free trade agreements on international trade flow of Pakistan with respects to 47 global trading partners from 1980 to 2016 using log-linear panel generalized ordinary least technique on augmented gravity equations. The result of the standard gravity equation is consistent with the theory of the model. The findings of the augmented gravity models revealed that the SAFTA have a significant negative effect in both export flow and import flow indicating lower trade creation among regional countries. The findings of bilateral free trade agreements with China, Malaysia, and Indonesia revealed a significant positive effect on import flow; whereas, insignificant and/or negative effect is observed in exports flow. The FTA with Sri Lanka and the USA revealed the negative effect on import flow with a positive effect on bilateral export flow. Pakistan should revisit these free trade agreements and renegotiate for corresponding market access.

Suggested Citation

  • Shujaat Abbas, 2018. "Free Trade Agreements and International Trade Flow of Pakistan: the Gravity Modelling Approach," Journal Global Policy and Governance, Transition Academia Press, vol. 7(2), pages 71-84.
    • Handle: RePEc:ase:jgpgta:v:7:y:2018:i:2:p:71-84:id:248
    as

    Download full text from publisher

    File URL: https://transitionacademiapress.org/jgpg/article/view/248/157
    Download Restriction: Access to full texts is restricted to Journal Global Policy and Governance
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pastore Francesco & Ferragina Anna Maria & Giovannetti Giorgia, 2009. "A Tale of Parallel Integration Processes: A Gravity Analysis of EU Trade with Mediterranean and Central and Eastern European Countries," Review of Middle East Economics and Finance, De Gruyter, vol. 5(2), pages 21-44, September.
    2. Hassan, M. Kabir, 2001. "Is SAARC a viable economic block? evidence from gravity model," Journal of Asian Economics, Elsevier, vol. 12(2), pages 263-290.
    3. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    4. Nazia Gul & Hafiz M. Yasin, 2011. "The Trade Potential of Pakistan: An Application of the Gravity Model," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(1), pages 23-62, Jan-Jun.
    5. Shujaat Abbas & Abdul Waheed, 2015. "Pakistan’s potential export flow: The gravity model approach," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(4), pages 367-377, October-D.
    6. E. Mine Cinar & Joseph Johnson & Katherine Geusz, 2016. "Estimating Chinese Trade Relationships with the Silk Road Countries," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(1), pages 85-103, January.
    7. van Bergeijk,Peter A. G. & Brakman,Steven (ed.), 2010. "The Gravity Model in International Trade," Cambridge Books, Cambridge University Press, number 9780521196154.
    8. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-153, February.
    9. World Bank, 2017. "World Development Indicators 2017," World Bank Publications - Books, The World Bank Group, number 26447, December.
    10. Emiliano Magrini & Pierluigi Montalbano & Silvia Nenci, 2017. "Are EU trade preferences really effective? An impact evaluation assessment of the Southern Mediterranean Countries’ case," International Review of Applied Economics, Taylor & Francis Journals, vol. 31(1), pages 126-144, January.
    11. Shujaat Abbas, 2016. "Remittances Flow to Pakistan: A Gravity Approach," Journal Transition Studies Review, Transition Academia Press, vol. 23(1), pages 97-106.
    12. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    13. Naseem Akhter & Ejaz Ghani, 2010. "Regional Integration in South Asia: An Analysis of Trade Flows Using the Gravity Model," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(2), pages 105-118.
    14. Leamer, Edward E, 1974. "The Commodity Composition of International Trade in Manufactures: An Empirical Analysis," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 350-374, November.
    15. Bergstrand, Jeffrey H, 1990. "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal, Royal Economic Society, vol. 100(403), pages 1216-1229, December.
    16. Abbas Shujaat & Waheed Abdul, 2018. "Import Determinants and Potential Markets: A Panel Data Gravity Modelling Analysis for Bahrain," Review of Middle East Economics and Finance, De Gruyter, vol. 14(1), pages 1-7, April.
    17. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
    18. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shujaat Abbas & Abdul Waheed, 2019. "Pakistan’s Global Trade Potential: A Gravity Model Approach," Global Business Review, International Management Institute, vol. 20(6), pages 1361-1371, December.
    2. Salahuddin & Javed Iqbal & Misbah Nosheen, 2020. "Economic & Cultural Distance & Regional Integration: Evidence from Gravity Model Using Disaggregated Data for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(2), pages 243-274.
    3. Kareem, Fatima Olanike & Martinez-Zarzoso, Inmaculada & Brümmer, Bernhard, 2016. "Fitting the Gravity Model when Zero Trade Flows are Frequent: a Comparison of Estimation Techniques using Africa's Trade Data," GlobalFood Discussion Papers 230588, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    4. Abbas Shujaat & Waheed Abdul, 2018. "Import Determinants and Potential Markets: A Panel Data Gravity Modelling Analysis for Bahrain," Review of Middle East Economics and Finance, De Gruyter, vol. 14(1), pages 1-7, April.
    5. Lee, Hiro & Roland-Holst, David W., 1998. "Prelude to the pacific century: Overview of the region, leading issues, and methodology," MPRA Paper 82339, University Library of Munich, Germany.
    6. Amjad Naveed & Ghulam Shabbir & Shabib Haider Syed & Muhammad Ashfaq & Muhammad Ali Khan, 2022. "Can a path to peace promote export growth? Evidence from Pakistan and its trading partners," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(5), pages 3309-3324, October.
    7. Dreyer, Heiko, 2014. "Misaligned distance: Why distance can have a positive effect on trade in agricultural," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170455, Agricultural and Applied Economics Association.
    8. Alan V. Deardorff, 2011. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 24, pages 267-293, World Scientific Publishing Co. Pte. Ltd..
    9. Dinçer, Gönül, 2014. "Turkey’s Rising Imports from BRICS: A Gravity Model Approach," MPRA Paper 61979, University Library of Munich, Germany.
    10. Horácio C. Faustino & Nuno Carlos Leitão, 2008. "Immigration and Trade in Portugal: A Static and Dynamic Panel Data Analysis," Working Papers Department of Economics 2008/31, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    11. Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2011. "Trade booms, trade busts, and trade costs," Journal of International Economics, Elsevier, vol. 83(2), pages 185-201, March.
    12. Muhammad Ullah & Kazuo Inaba, 2012. "Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model," Journal of Industry, Competition and Trade, Springer, vol. 12(4), pages 445-460, December.
    13. Chengang Wang & Yingqi Wei & Xiaming Liu, 2010. "Determinants of Bilateral Trade Flows in OECD Countries: Evidence from Gravity Panel Data Models," The World Economy, Wiley Blackwell, vol. 33(7), pages 894-915, July.
    14. Dreyer, Heiko & Fedoseeva, Svetlana & Herrmann, Roland, 2016. "Gravity Meets Pricing To Market: What A Combinedmethod Approach Tells Us On German Beer Exports," Working Papers 234640, American Association of Wine Economists.
    15. Cafiso, Gianluca, 2007. "The Geographic Space in International Trade: from Gravity to New Economic Geography," MPRA Paper 20269, University Library of Munich, Germany.
    16. Paas, Tiiu, 2002. "Gravity Approach for Exploring Baltic Sea Regional Integration in the Field of International Trade," Discussion Paper Series 26379, Hamburg Institute of International Economics.
    17. A. James Wynne & Chandrashekar Challa & John Palesis & Bernie Farkas, 2015. "A Conceptual Model: Impact Of Usage Of Social Media Tools To Enhance Project Management Success," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(2), pages 55-72.
    18. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    19. Tamer Afifi, 2006. "Institutional Reform: a Step Towards Free Trade in Egypt," EcoMod2006 272100001, EcoMod.
    20. Haq, Zahoor Ul & Meilke, Karl D. & Cranfield, John A.L., 2011. "The Gravity Model and the Problem of Zero's in Agrifood Trade," Working Papers 116851, Canadian Agricultural Trade Policy Research Network.

    More about this item

    Keywords

    free trade agreements; export flow; imports flow; economic integration; gravity model; panel data;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ase:jgpgta:v:7:y:2018:i:2:p:71-84:id:248. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giorgio Dominese (email available below). General contact details of provider: https://transitionacademiapress.org/jgpg/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.