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Beyond Normalization of Trade Ties - A Pakistan – India Free Trade Agreement (FTA): A Stochastic Frontier Gravity Model (SFGM) Approach

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  • Kamal, Asmma

Abstract

Several studies have estimated a large bilateral trade potential and have emphasized on normalization of trade ties between Pakistan and India, the two largest economics in the South Asian region. However, this paper explores the possibility of bilateral trade beyond MFN (Most-favoured Nation) basis and examines the potential of a deeper economic integration through a Free Trade Agreement (FTA) between Pakistan and India. In the above context, this paper employs the Stochastic Frontier Gravity Model (SFGM) to quantitatively measure the influence of “behind the border” constraints on achieving Pakistan’s maximum export potential towards India during 2013-15. Results confirm that Pakistan has a large unrealized export potential with India. They further indicate that the potential for an FTA appears to be significant, but contingent upon the effective reduction of “behind the border” constraints limiting Pakistan’s export potential.

Suggested Citation

  • Kamal, Asmma, 2016. "Beyond Normalization of Trade Ties - A Pakistan – India Free Trade Agreement (FTA): A Stochastic Frontier Gravity Model (SFGM) Approach," MPRA Paper 87743, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87743
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    More about this item

    Keywords

    Free Trade Agreement (FTA); Pakistan; India; Stochastic Frontier Gravity Model (SFGM); Regional trade;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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