Determinants of Bilateral Trade Between Pakistan and United Arab Emirates

Abstract

Bilateral trade refers to the exchange of goods, services, and investments between two countries. It involves the import and export of goods and services, specifically between two trading partners. In a bilateral trade relationship, each country benefits from the other's resources, capabilities, and market demand. Pakistan and the United Arab Emirates (UAE) have maintained strong trade relations over the years. The UAE is one of Pakistan's largest trading partners in the Middle East region. To analyze the factors affecting bilateral trade between Pakistan and United Arab Emirates, various variables were chosen, and time series data from 1975 to 2022 was used for the study. Information on these indicators was sourced from the World Bank, the Federal Bureau of Statistics in Islamabad, Pakistan, the State Bank of Pakistan, the Pakistan Economic Survey, International Financial Statistics, and the International Monetary Fund. For this purpose, the Pooled OLS model was used to estimate the impact of different factors. A unit increase in the UAE's GDP is associated with an increase of 34.460 in the dependent variable. The significance level of .000 suggests that the GDP of UAE is highly significant in predicting the dependent variable. A unit increase in the population of Pakistan is associated with an increase of 31.677 in the dependent variable. The significance level of .046 is under the .05 threshold, indicating that the population of Pakistan is statistically significant. A unit increase in the population of UAE is associated with an increase of 927.301 in the dependent variable. With a significance level of .046, the population of UAE is also a significant predictor. A unit increase in inflation in Pakistan is associated with a decrease of 35.647 in the dependent variable. At a significance level of .016, inflation in Pakistan is a significant predictor. A unit increase in the exchange rate in UAE is associated with a substantial increase of 2973.807 in the dependent variable. With a significance level of .055, the exchange rate in UAE is close to being statistically significant but falls just outside the commonly used threshold of .05.