Determinants of Pakistan's Exports in Selected Asian Countries. A Panel Gravity Model Approach

Abstract

The study investigates to estimate the determinants of exports of Pakistan with selected Asian economies utilizing a gravity approach of trade. This research consists of panel data using time from 1980-2020. The econometric techniques pooled OLS, fixed effects, and random-effect estimators have been used in this study. The result shows that the product of Pakistan's GDP and selected Asian countries positively and significantly impacts Pakistan's exports. Similarly, the product of Pakistan's per capita income and selected Asian economies also positively impacts Pakistan's exports. The impact of distances is negative but insignificant. The novelty of this research is that it observes the effect of qualitative variables along with basic gravity variables. The study also finds language and FTA's positive and insignificant impact on dependent variable export. The impact of Common Border and Religion is negative and insignificant on export. These results are against the economic theory. The findings of the study suggest that Pakistan should accelerate its GDP level so that its exports may increase. Pakistan should adopt the policy of free trade among Asian economies. Pakistan should increase trade relations with Muslim countries so that the positive impact of cultural similarity (religion) may be captured.