Recent Trends and Prospects of Bilateral Trade between Pakistan and Turkey: A Gravity Model Approach Farrukh Suvankulov and Wazir Ali (original) (raw)
Related papers
Recent Trends and Prospects of Bilateral Trade between Pakistan and Turkey: A Gravity Model Approach
Pakistan's economic ties with Turkey have improved in the past few years. A recently stated pledge to create a free trade agreement between Pakistan and Turkey is likely to trigger a further expansion of economic integration. This paper starts by reviewing trends in Pakistan's bilateral trade with Turkey since 1996. Next, it estimates an augmented gravity model aiming to project Pakistan's trade potential with Turkey and compare them with the actual flows in 1996-2009 period.
This study aimed to investigate Pakistan's bilateral trade flows with major trading partners. Panel data for the time period 1990-2010 with a frequency of two years was analyzed. Gravity model was employed for the analysis of the data and proved to be successful in explaining Pakistan's bilateral trade flows by high values of Rsquare and adjusted R-square. Results revealed that GDP and GDP Per capita positively affect trade volume while distance and dummy variable for cultural similarities showed a negative relationship towards trade volume. Ratio of actual trade to predicted trade determined for each of the partner country for the year 2010 revealed that Japan, Turkey, Malaysia, India and Iran have greater unrealized trade potential with Pakistan which leads to policy implications.
The Trade Potential of Pakistan: An Application of the Gravity Model
THE LAHORE JOURNAL OF ECONOMICS
This paper attempts to estimate Pakistan’s trade potential, using the gravity model of trade. Panel data for the period 1981-2005 across 42 countries is employed in the analysis. The coefficients obtained from the model are then used to predict the country’s trade potential worldwide as well as within specific trading regions. The results reveal that Pakistan’s trade potential is highest with countries in the Asia-Pacific region (the Association of Southeast Asian Nations [ASEAN]), the European Union (EU), the Middle East, Latin America, and North America. Specifically, the maximum potential exists with Japan, Sri Lanka, Bangladesh, Malaysia, the Philippines, New Zealand, Norway, Sweden, Italy, and Denmark. Therefore, Pakistan should explore ways and means to further improve its trade relations with the countries concerned, and also concentrate on ASEAN, the Middle East, and the EU to increase its market share as far as possible. The volume of trade between Pakistan and other member...
Cogent Economics & Finance, 2018
The decades-long history of friendly relationship in both countries bore the fruits in the form of Pakistan–China free-trade agreement (PCFTA) in 2006. This paper aims to estimate Pakistan's bilateral trade potential with China by employing gravity model of trade in a panel data set covering the period 1992–2015. In an attempt to obtain unbiased results we have utilized various estimation methods as suggested by the recent empirical literature on gravity equation to acquire the maximum variation in results. The results from EGLS, REM, two-stage EGLS, GMM, Tobit and PPML have shown that Pakistan' bilateral trade with all FTA partner countries is positively affected by GDPs, religion, WTO, trade openness in both countries and the common border; whereas negatively affected by geographical distance and inflation. It is also stated that common language and (Trade Agreements) PTA found to be pessimistically exaggerated bilateral trade of Pakistan with FTA partners. The overall PTA effect is negative and highly significant albeit we have found immense trade potential of Pakistan in case of China by most of the estimation techniques. The industry of Pakistan and exporters should adopt new measures to boost and diversify the exports to China and to bring about a reasonable equality in mutual trading relations.
Trade potential of Pakistan with the South Asian Countries: A gravity model approach
Elsviour , 2022
The current study investigates the trade potential of Pakistan with South Asian countries using an augmented Gravity Model approach. The model used latest ESCAP dataset with base year 2016. Results show that simple average tariff imposition and GDP of partner countries positively impact the trade value of Pakistan, whereas simple average tariff imposition bilaterally harms the trade volume of the reporting country. Statistically, a one percent change in the tariffs rate will decrease 0.3 percent in Pakistan's total trade. Moreover, a one percent increase in the GDP of the partner countries will increase Pakistan's total trade by 0.5 percent. We also found that common language, landlocked, and distance significantly impact Pakistan's total trade. This research recommends South Asian countries to revise the tariff rates and other non-Tariff barriers to boost trade and connectivity for the better future of the inhabitants of South Asian countries.
iRASD Journal of Economics, 2022
This research study employs a gravity model to explore Pakistan's trade potential from 2000 to 2020. China, United Arab Emirates (UAE), Saudi Arabia (KSA), Kuwait, United States (USA), Malaysia, Japan, India, Singapore, Afghanistan, Iran, Spain, Germany, United Kingdom (UK) and Belgium are among our significant trading partners. The study uses both static and dynamic econometric techniques to capture the trade potential of Pakistan. The findings from both methodologies are comparable, indicating that economic size and distance have a significant effect on bilateral trade. Furthermore, throughout the research period, political globalization is determined to be considerable and has an important influence on the economic masses. These factors support the theoretical model(s) that Pakistan and Pakistan’s trading partners with economic integration, political globalization, and distance all depict a significant impact on trade relations.
Pakistan Journal of Commerce and Social Sciences, 2012
This paper critically analyzes Pakistan’s import policy during 1990s and explores the determinants of bilateral import flows between Pakistan and selected Asian countries (SAC) in recent past. Much research on international trade patterns focuses on primitive causes of trade such as differences in national factor endowments, preferences and technologies but we have focused on macroeconomic determinants to overcome the problems of trade deficit. It contains the policy issues which may be helpful for policy makers of other developing countries facing same conditions. A gravity model of international trade is empirically tested with the help of generalized least square (GLS) method of estimation for panel data. Empirical results reveal that income, exchange rate and openness of SAC economies are contributing factor of Pakistan’s import flows. There is convincing evidence that current import flows are positively correlated with previous year whereas infrastructural bottlenecks have nega...
A CGE Analysis of Pakistan-Turkey Free Trade Agreement
This paper investigates the possible impacts of Pakistan-Turkey free trade agreement (Pak-Turk FTA) on various sectors of the economy in the two countries under four different possible FTA scenarios by using computable general equilibrium model GTAP. Global Trade Analysis Project (GTAP) model has been extensively used in FTAs and other Trade related studies to evaluate the economy-wide potential impact of economic policy reforms. Current study uses the GTAP database7 which includes; 57 tradable commodities and 113 regions across the world. Our findings suggest that; Turkey is more beneficial from Free Trade Agreement as compared to Pakistan .Overall impact of trade liberalization is favorable for both economies, but liberalization of protected sectors may prove to be unfavorable for the economy in case of Pakistan. And there is a huge potential for bilateral trade in textile and chemical sector. Keyword: Computable General Equilibrium (CGE) Analysis, Free Trade Agreement (FTA), Pakistan, and Turkey. JEL classification: F10, F14, F17
Trade potential of Turkey with Asia-Pacific countries: Evidences from panel gravity model
As a result of recent developments, global economic centre of gravity has slide to Asia-Pacific region. It is predicted that Asia-Pacific countries will take place at the first row in global trade and nearly a half of the total trade will intensify in this region at the year 2030. On the other hand, the region covers countries from different levels of development. These features of the region promise umpteen trade opportunities for countries from other parts of world. Particularly after import-substitution policies were abandoned in favor of trade integration measures since 1980s the share of foreign trade in GDP raised. Recent years have witnessed a more remarkable increase in exports. In this regard, the government started to execute the "Strategy for Developing Commercial and Economic Relations with Asia-Pacific Countries" in 2005. By this plan it was aimed to raise the market shares of Turkish firms in Asia-Pacific countries, to enhance the potential of Turkish defense industry, and to attract more investments from region's countries which have rich capital accumulation. Thus, the issue of trade potential of Turkey with Asia-Pacific countries gains importance. In this paper we attempt to estimate trade potential for Turkey using the gravity model approach. To this end we use gravity model to first analyze the effective gravitational factors on trade flows and the coefficients thus obtained are then used to estimate the trade potential for Turkey. The results of the fixed effect model reveal that the trade volume between Turkey and Asia-Pacific countries is positively affected from economic size of the countries, while distance plays negative role on trade. The size of the countries with respect to population seems no meaningful effect. On the other hand, depending on the gravity model, our estimates of Turkey's trade potential for Asia-Pacific countries reveal that the P. N. Guinea, Peru, Myanmar, Mexico, Laos, Brunei promise potential for expansion of trade. Our estimates indicate that Turkey's actual trade level with rest of the countries in the sample has exceeded her trade potential.
Pak-India Trade Relationship Based on Gravity Modeling: Issues and Challenges
2013
This research explores the Pak-India Trade reforms and its impact on the economy of Pakistan. Economic integration is considered as a policy by which trade barriers should fall gradually or disappear fully among members of a trading block. The regional Block trade is gaining importance in the world to make economic cooperation more beneficial to the members in order to