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

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  • Abbas, Shujaat

Abstract

This study explores the effect of free trade agreements (FTAs) on international trade flow of Pakistan by using contemporary panel estimation techniques on augmented gravity models for export flow and import flow with major 47 global trading partners from 1980 to 2016. The estimated results of standard gravity equations are consistent with the theory; whereas, findings of augmented variables revealed significant negative effect of SAFTA on both exports and imports flow. The FTA with China, Malaysia, and Indonesia have significant positive effect on imports with insignificant/negative effect on exports flow; whereas, FTA with Bangladesh, Sri Lanka, and the USA have significant positive effect on export flow with insignificant/negative effect on imports. The study urges Pakistan to revisit its FTA policies with China, Malaysia, and Indonesia for greater market access. Future studies should address the disaggregated behavior of bilateral trade flow between Pakistan and its trading partners with preferential/free trade agreements

Suggested Citation

  • Abbas, Shujaat, 2018. "Free Trade Agreements and International Trade Flow of Pakistan: A Gravity Modelling Approach," MPRA Paper 107247, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107247
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    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

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