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An empirical examination of trade flows in the SAARC region

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  • P.R. Madhusoodanan

Abstract

South Asia combines a low level of regional integration and the presence of relatively high trade barriers. The proportion of trade originating in the region has increased in the last decade but still lags behind many similar regional arrangements. The present study employs an augmented gravity model to examine the impact of a set of macroeconomic and other policy factors on trade flows in the South Asian Association for Regional Cooperation (SAARC) region. The interesting finding is that export between two countries would increase by 152.2%, if there exists a bilateral trade agreement between countries compared to country-pairs without having bilateral trade ties. The empirical analysis reveals that reduction in tariff level is also a better measure to improve trade in the region. Further, the study supports specialisation in the region based on the relative factor endowments and cost advantage as well.

Suggested Citation

  • P.R. Madhusoodanan, 2010. "An empirical examination of trade flows in the SAARC region," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 5(3), pages 273-279.
    • Handle: RePEc:ids:ijbglo:v:5:y:2010:i:3:p:273-279
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    Cited by:

    1. Domenico Gattuso & Gian Carla Cassone & Domenica Savia Pellicanò, 2022. "Assessment of freight traffic flows and harmful emissions in euro-mediterranean context: scenario analyses based on a gravity model," Journal of Shipping and Trade, Springer, vol. 7(1), pages 1-18, December.

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