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An Empirical Analysis of Pakistan’s Bilateral Trade: A Gravity Model Approach

Author

Listed:
  • Shaista Khan

    (Kohat University of Science & Technology, Kohat, Pakistan)

  • Ihtisham ul Haq

    (Kohat University of Science & Technology, Kohat, Pakistan)

  • Dilawar Khan

    (Kohat University of Science & Technology, Kohat, Pakistan)

Abstract

This study aimed to investigate Pakistan’s bilateral trade flows with major trading partners. Panel data for the time period 1990-2010 with a frequency of two years was analyzed. Gravity model was employed for the analysis of the data and proved to be successful in explaining Pakistan’s bilateral trade flows by high values of R-square and adjusted R-square. Results revealed that GDP and GDP Per capita positively affect trade volume while distance and dummy variable for cultural similarities showed a negative relationship towards trade volume. Ratio of actual trade to predicted trade determined for each of the partner country for the year 2010 revealed that Japan, Turkey, Malaysia, India and Iran have greater unrealized trade potential with Pakistan which leads to policy implications.

Suggested Citation

  • Shaista Khan & Ihtisham ul Haq & Dilawar Khan, 2013. "An Empirical Analysis of Pakistan’s Bilateral Trade: A Gravity Model Approach," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(48), pages 103-120, June.
    • Handle: RePEc:rej:journl:v:16:y:2013:i:47:p:103-120
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    File URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2013-06-01/1923/khan.pdf
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    References listed on IDEAS

    as
    1. Giorgio, Ricchiuti, 2004. "Empirical Evidence on the North-South Trade Flows: an Augmented Gravity Model," MPRA Paper 1326, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Gulzar Ali & Zhaohua Li, 2017. "An Empirical Investigation on the Role of exports, imports and its Determinants in Foreign Trade of Pakistan," Information Management and Business Review, AMH International, vol. 8(6), pages 39-58.
    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. Degirmenci N. & Yakıcı Ayan T., 2019. "Gravity Approach for Determinants of Exports," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 102-111.
    4. Wani Suadat Hussain & Mir M. Afzal, 2023. "Import Determinants and Potential Markets of Pakistan: An Application of PPML Gravity Model," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(1), pages 57-73, March.
    5. Asha Gul, 2014. "Analyzing Pakistan’s Trade Opportunity with Turkey," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(Special E), pages 349-370, September.
    6. Sultan, Maryam & Munir, Kashif, 2015. "Export, Import and Total Trade Potential of Pakistan: A Gravity Model Approach," MPRA Paper 66621, University Library of Munich, Germany.
    7. Gulzar Ali & Zhaohua Li, 2016. "Analyzing the role of Imports in Economic Growth of Pakistan; Evidence from ARDL Bound Testing Approach," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(9), pages 19-37, September.

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    More about this item

    Keywords

    Trade volume; GDP; Gravity model; Trade Potential; Geographical distance;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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