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Pakistan's Export Potential: A Gravity Model Analysis

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  • Waheed Akram Butt

    (State Bank BSC (Bank), The Mall, Rawalpindi)

Abstract

The study employs Gravity Model to estimate Pakistan’s export potentials with the global and bilateral trading partners for the 19 sectors of the economy. We use cross sectional data for 132 exporting and 154 importing countries for the years 2002-03. The study applies the pseudo maximum likelihood methodology to estimate the gravity equation. The results depict that the model fits well with the data and estimation provides reasonable signs and results for distance, geographical, cultural and historical factors employed in the analysis. On the aggregate level, the model identifies highest export potentials with the countries such as India, Japan, Hong Kong, China and USA whereas Pakistan is exhausting its export potentials with some countries namely UK, Turkey and Bangladesh. On the sectoral level, the bilateral results reveal additional export potential for 13 out of 15 sectors with India. Similarly, the sectoral results for China also unveil untapped potentials for Pakistani exporters in 10 out of 15 sectors. Length: 27 pages

Suggested Citation

  • Waheed Akram Butt, 2008. "Pakistan's Export Potential: A Gravity Model Analysis," SBP Working Paper Series 23, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:23
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    File URL: http://www.sbp.org.pk/repec/sbp/wpaper/wp23.pdf
    File Function: First version, 2008
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    References listed on IDEAS

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    1. 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..
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    5. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    6. Antoine Bouët & Lionel Fontagné & Mondher Mimouni & Xavier Pichot, 2001. "Market Access Maps: A Bilateral and Disaggregated Measure of Market Access," Working Papers 2001-18, CEPII research center.
    7. Baldwin, Richard, 1993. "The Potential for Trade Between the Countries of EFTA and Central and Eastern Europe," CEPR Discussion Papers 853, C.E.P.R. Discussion Papers.
    8. 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.
    9. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, April.
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    Citations

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    Cited by:

    1. Ghulam Shabbir & Amjad Naveed & Muhammad Ali Khan & Shabib Haider Syed, 2022. "Does Peace Promote Bilateral Trade Flows? An Economic Analysis of Panel Data in Asian Perspective," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(1), pages 143-158, March.
    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. Jinhwan Oh & Orgilbold Tumurbaatar, 2011. "Mongolia's International Trade: Impact of Its Geographical Location," Working Papers EMS_2011_02, Research Institute, International University of Japan.
    4. 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.
    5. Hippolyte, Rommell, 2012. "Determinants of Barbados Exports: Preliminary Analysis using a Gravity Model Approach," MPRA Paper 75321, University Library of Munich, Germany, revised Jun 2015.

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    More about this item

    Keywords

    Gravity model; export potential;

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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