Munich Personal RePEc Archive

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

Abbas, Shujaat (2018): Free Trade Agreements and International Trade Flow of Pakistan: A Gravity Modelling Approach. Published in: Journal Global Policy and Governance , Vol. 7, No. 2 (2018): pp. 71-84.

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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

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