Pakistan Trade Research Articles

IS EXCHANGE RATE EFFECT TRADE BALANCE IN PAKISTAN? EVIDENCE BASED ON J- CURVE

This study aims to find out the relationship of how exchange rate effect the balance of trade in Pakistan over the period 1982-2016 within the context of J-curve phenomenon. We employed an Autoregressive Distributed Lag (ARDL) approach to cointegration. To investigate the short run dynamics of the study, we have estimated an error correction model. The unit root results provide a mix of I(0) and I(1) variables. The results of diagnostic tests indicate no econometric problem in the estimated model. The CUSUM and CUSUM of squared test confirms the stability of the estimated model. We summarize the estimated results as follow: first, we found an evidence of cointegration among the variables. Second, the long run results shows significant effect of REER on trade balance in Pakistan. Third, we found an evidence of J-curve in case of Pakistan.

Pakistan’s Trade and Trading Partners Using Gravity Model: A Static and Dynamic Panel Data

This paper examines Pakistans trade flows using a gravity model for the period 2002-2015. We have selected the following major trade partners: China, UAE, Saudi Arab, United States, Kuwait, Malaysia, Japan, India, Singapore, Afghanistan and Iran. In this research, we employed static and dynamic econometric approaches. The results from the two approaches are similar, which showed economic size and distance have played a crucial role in bilateral trade. Furthermore, political globalization was found to be significant and played a vital role during the study period. These variables confirm that the theoretical models, Pakistan and Pakistan trade partner with economic masses, political globalization, and distance strongly effect trade liaison

Role of CPEC in Development of Trade, Transport and Economy of Pakistan

Abstract The objectives of the study were to measure the efficiency in trade and transport through China Pakistan Economic Corridor (CPEC) and to ascertain efficiency in trade and economic development through developed transport infrastructures. The present study was conducted in Peshawar, Pakistan. The data was collected from the relevant developing sectors and stakeholders through CPEC including investors of Khyber Pakhtunkhwa Chamber of Commerce and Peshawar Railway Station track employees. Majority of bi-variate analysis through chi-square test result showed that there was a strong and significant association between the project of CPEC and efficiency in trade and transport in terms of economy. Similarly, a strong and significant association was found between the development of transport routes through CPEC and smooth transportation of goods and services. Furthermore, a strong and significant association was found between CPEC project and improvement in travelling potential. Similarly, a significant association was found between development in transport infrastructure and fastness and reliability in business travelling. In the same way, a significant association was found between CPEC and increase in the geographical size of the labour market. As in the chain, a strong and significant association was found between the development of transport infrastructures through CPEC and increase in labour force productivity along with an increase in the range of choice of individual and firms. This could come true that CPEC as a project would ensure smooth efficiency transportation of trade goods and services in terms of reducing time distance and cost. CPEC as a project should not be only limited to economic activities, rather it should contribute to the overall socio-economic development of the region.

Gwadar Port: As an Economic hub for Maritime Trade in the World Corridor (CPEC)

Gwadar port, deep-sea port, is used and operated as a mean to serve the supply and import requirements of a well prominent hinterland, as other harbors of Pakistan has been working. Gwadar port is situated in the Arabian Sea, at Gwadar in Baluchistan province of Pakistan. The economic prediction of Gwadar port is the trump card for economy and trade routes for Central Asian States and the world, which holding trade from the western part of China and assume as reasonable interchange transshipment to another desire ports of the region. The port features prominently in the China–Pakistan Economic Corridor (CPEC) plan, and is considered to be a crucial link between the ambitious One Belt, One Road and Maritime Silk Road projects. The proposed paper through the empirical and inductive research approach tries to identify the importance of Gwadar port in the economic and maritime trade of in the world. Gwadar port has an eminent status in the trade of China and Pakistan throughout the world. In future, it will be a keystone in the economic development of Baluchistan as well as Pakistan. Furthermore, China is also investing in the development of Gwadar port to make it the center of maritime trade of Chinese products. Thus, in a short span it becomes a center of maritime trade of the world.

Globalization and Foreign Trade of Pakistan with D-8 Group

<p><em>Globalization has made the world smaller and flatter which is called “the death of distance”</em><em>.</em><em> This phenomenon has brought considerable increase in international trade in recent past. Many developing countries have been benefitted from the fruits of globalization and many other like Pakistan have lagged behind in the race. Pakistan is suffering persistently from trade deficit since 2003 and by the same point of time India, Sri Lanka and Bangladesh which share similar socio-economic conditions to Pakistan: are experiencing upward trend. This study investigates the popular theory “the gravity model of trade” in the context of Pakistan’s export flow to D-8 group. The gravity trade model has been innovated by introducing overall </em><em>G</em><em>lobalization </em><em>I</em><em>ndex (GI) which led to improve explanatory power of gravity model. This research, in panel setting has used annual data ranging from 2003 to 2013, by employing advance estimation technique PPML, Estimator. The empirical results of the study infer that GDP, population and distance confirm the basic gravity model. While the globalization Index and contiguity variables are against the expected signs. Therfore, it is concluded that Pakistan need to explore new destinations specially should target the developing countries for its exports.</em><em></em></p>

Free Trade Agreements and Environmental Nexus in Pakistan

This study attempts to examine the relationship between Free Trade Agreements (FTAs) and Carbon Dioxide (CO2) emissions in Pakistan. Panel unit root, panel co-integration, and Fully Modified OLS (FMOLS) estimators were employed to investigate the existence of long-run relationship between Gross Domestic Product (GDP), Trade openness (TO) and energy consumption (EC) with CO2 emissions in Pakistan from 1980 to 2014. The results show that GDP per capita have a significant positive effect on CO2 emissions. This implies that an increase in GDP per capita increases CO2 emissions and show a scale effect. The results also indicate the existence of long run positive relationship of energy consumption on carbon emission and negative relationship with trade openness and FTA. This research is helpful for policy makers to eliminate the negative impact by adopting appropriate policy instruments and promote Pakistan's trade in the international market.

WTO AND INDIA PAKISTAN TRADE RELATION

In this paper an effort is made to study the impact of WTO on India Pakistan trade relation. The present study is based on secondary data. The annual time series from 1983-84 to 2008-09 is used, which is divided into two sub periods from 1983 to 1995, before WTO and from 1995 to 2008, after WTO. Non -Econometric and Econometric approaches have been used. In non-econometric approach calculation of the chain index, graphs and tabulation, ratios, percentages, growth rates all these techniques were used for analysis. The shares in percentage terms have been calculated. Under econometric approach GDP of three economies are taken as independent variables and bilateral trade flow as dependent variable. The reasons for taken these three variables are to analyze it in context of the size of three economies at large. In this way the model is restricted gravity model of the trade which supported that trade is positively related with the size of the economies and inversely with distance. Simple test of stability of parameters has worked out to know the impact statistically.  It was found that there was not a significant impact of the WTO on the bilateral trade of India and Pakistan. Following the findings the study recommended that in order to make any policy effective the realization of the mutual benefit from the bilateral trade is important. The study also provides scope that to make any policy effective close economic ties are important for both counties which will not have trade effect but restoration of political stability effect as well.

Pakistan's Trade Complementarities with OECD Countries

This paper has made an empirical analysis to ascertain complementarities of Pakistan with OECD countries. The objective of the study is to check how well export of Pakistan matches with the import of OECD countries in order to find out the suitable courtiers, with them Pakistan can boost its export. Annual data has been taken from Un-Com trade’s webs site over the period 2001-2016, based on SITC Rev.3 at two digit level. 96 Product categories as whole. And used Trade Complementarity Index as a measure for assesses Complementarity of Pakistan with all OECD countries that are 33 in number. Result of trade complementarity indices shows that if answer of TCI is more near to one that is more favorable and well match partner for trade. Most of the results of our study is above 0.2 that means Pakistan export partially match with the most of the countries just answer of hungry is below than 0.2 meaning that Pakistan need to fuscous upon all OECD countries for boost its export.

Impact of China-Pakistan Economic Corridor (CPEC) on Pakistan's trade: Empirical Evidence from Gravity Model

Purpose: The China-Pakistan Economic Corridor(CPEC) is an enormous project for both economies. There are much potential remunerations for concerning frugalities in trade and industries of both countries. The study was specifically designed to examine the influence of CPEC on fruits export of Pakistan. The bilateral or regional trade was examined through Gravity approach. Data was taken from 2013 to 2015. Since distance plays a vital role in trade, the outcomes of gravity model are estimated with ordinary least square method. Pakistan China Economic Corridor is a mega project for both economies. It will make Pakistan and China, the major economic players in the region and further enhance economic conditions of both countries. Some of the basic determinations of Pak-China economic corridor are to boost business opportunities, efficient transport routes and expanding regional trade. The export target of Pakistan was $ US 20 billion in 2013-2015. As of April 2015, Pakistan exports stand at $ US 6,178 billion. Pakistan’s exports to Asia was amounted to $ US 1,649 billion which was 42 percent of its overall exports and the share of fruit and nuts markets in Pakistan's export was $ US 1,017 billion. The paper analyses the CPEC's impact on exports especially exports from fruit market of Pakistan using Gravity Approach for the evaluation of this bilateral trade. The results show that CPEC reduces the distance and it will be more beneficial for perishable goods trade like fruits.

Uncertainty and Risk Analysis of Pakistan's Regional Trade: Fan Chart Approach

Economic forecasting, both specific and general, is a crucial part of economic planning for a country. It is required to effectively deal with uncertainity as well as possible negative impact of proposed policies in future. Therefore, correct predictions will improve the effectiveness of the decision-making process. This study is a pioneering attempt to forecast aggregate and regional trade of Pakistan by using annual time series data from 1974 to 2014. With the help of fan chart, aggregate and regional trade of Pakistan have been forecast from 2015 to 2020. Fan chart provides ranges of forecast at different levels of significance as well as assesses. The risk associated with the forecast value, namely upside and downside risk. The results suggest that there is considerable uncertainty associated with the regional trade of Pakistan. The policy makers are suggested to monitor downside risk associated with the exports and upside risk associated with the imports of the country.

An Empirical Investigation on the Role of exports, imports and its Determinants in Foreign Trade of Pakistan

Abstract: Foreign trade was restrained by fluctuations and depreciations in currencies, nations were under financial pressure to implement protection measures in form of custom duties tariffs. These theories and thoughts have enormous impact on rules and policies of global trade throughout the world. To adopt economic liberalization and free trade zones nations all over the world are connected through number of agreements since last few centuries. In this revolutionized economic system, nations allow free trading of merchandise and services and at the same time don't have to impose tariff in form of import and exports duties. This study attempted to empirically evaluate the role of imports, exports and its determinants in foreign trade of Pakistan applied ARDL Approach for the period of 1972-2015. The study recommends that economies with significant competitiveness and comparative advantage will be greatly benefited from export promoting policies. As far as trade partners are concerned, no considerable efforts have been done to explore new markets in direction of Pakistan's foreign trade since its independence. The key trading partners of Pakistan in the beginning were the developed countries of West and still they are main trading partners of Pakistan.

Is There a Relationship between Foreign Direct Investment, Human Capital, Trade Openness and Economic Growth of Pakistani Economy?

Despite profuse literature on foreign direct investment, human capital and trade openness linkage with economic growth of developed economies, little profound literature is available in case of Pakistan. This paper specifically examines relationship of economic growth with foreign direct investment, human capital and trade openness for Pakistan over the time span 1980-2013. Applications of Johansen Co-integration test indicate the existence of long run relationship between the variables. In addition, VECM also confirms the long run relationship between variables. Also, diagnostic tests show normality and no auto correlation in the model. The CUSUMsq test signifies the specification of the model. The policy makers in Pakistan should employ policies to encourage FDI projects promoting domestic exports. Moreover, an increase in educational, health can result in efficient domestic human capital. The focus must also be on producing finished products in order to promote exports of Pakistan. Steps towards R&D activities should be encouraged to stimulate indigenous technological capability of Pakistan. This would upsurge the local production capability, capacity, promote exports, and improve terms of trade of Pakistan.

Destination EU and USA: Improving Export Potential of Pakistan by Trading with India

Abstract This paper is the extension of popular work of Murshed and Mamoon(2010) that suggests that India Pakistan proximity to global trade can significantly mitigate conflict between these two nations. The paper analyses bilateral trade patterns between India Pakistan with its major exporting destinations in a simple OLS framework. It finds that if bilateral trade between two nations increases that will improve exports of Pakistan in US, EU and UAE. This finding has significant implications for improvement of ties between the two countries. Furthermore, trading with India also full fills Pakistani Government’s emphasis on Trade not Aid. This aspect of India Pakistan trade has not been investigated before. Key words: Economic Integration. JEL: F15.

Intra Industry Trade, Fiscal Policy and Terms of Trade Of Pakistan: A Long Run Analysis Using ARDL Technique

This study investigates long run relationship between Intra Industry Trade, fiscal policy and Terms of Trade of Pakistan. Considering the intention, time series data having time span from 1972 to 2014 is chosen. Data is collected through various sources like World Development Indicators, Handbook of Statistics on Pakistan Economy (2010) and Economic Survey of Pakistan (2014 – 15). After observing mixed stationary results of the variables [I(0), I(1)] using Augmented Dickey Fuller test, autoregressive and distributed lag model technique is applied for the analysis. For estimating elasticities of terms of trade with respect to the variables, log – log form of the model is utilized. The study reveals Intra Industry Trade, Real Gross Capital Formation and Real Government Expenditure as significant causes of improving Terms of Trade of Pakistan. On the other side, Terms of Trade of Pakistan is deteriorated due to real Gross Domestic Product and Real Foreign Direct Investment.

Deltoid Analysis of Pakistan-ASEAN-China Free Trade Agreements and Opportunities for Pakistan

The interaction of nations shaped by their bilateral ties and the multilateral associations in the shape of triangles demonstrates an opportunity to acknowledge some interesting and motivating dynamics of the existing international trade relations among nations. This study on Pakistan- Association of Southeast Asian Nations-China Free Trade Agreement is an effort to highlight the potentials of the structure of this triangle and opportunities for Pakistan. The analysis shows Pakistan trade with China and ASEAN countries is rapidly growing in recent years but exports are still in lacking position. China-Pakistan Economics Corridor totally favorable for Pakistan and it will create more opportunities and long terms benefits for Pakistan. FTA with ASEAN is really potential from which Pakistan can get advantage in various areas to make cooperation such as trade and industry, environment, investment, science and technology, narcotics control, information technology, agriculture, education, tourism and human resource development. Pakistan and ASEAN countries share familiar aspirations for peace, development and prosperity of the region: therefore, it will be great if both parties can cooperate on a larger scale to benefit from each other.

International Trade of Pakistan: Issues and Evidence

This paper is an attempt to understand international trade of Pakistan. It has analysed external trade by focussing on traded goods, deficit on international trade, regional trade and trading partners. Analysis also includes an account of international trade of Pakistan with OIC-region, Developing-8 and Economic Cooperation Organization.

Intra Industry Trade, Fiscal Policy and Terms of Trade of Pakistan: A Long Run Analysis Using ARDL Technique

This study investigates long run relationship between Intra Industry Trade, fiscal policy and Terms of Trade of Pakistan. Considering the intention, time series data having time span from 1972 to 2014 is chosen. Data is collected through various sources like World Development Indicators, Handbook of Statistics on Pakistan Economy (2010) and Economic Survey of Pakistan (2014-15). After observing mixed stationary results of the variables [I(0), I(1)] using Augmented Dickey Fuller test, autoregressive and distributed lag model technique is applied for the analysis. For estimating elasticities of terms of trade with respect to the variables, log-log form of the model is utilized. The study reveals Intra Industry Trade, Real Gross Capital Formation and Real Government Expenditure as significant causes of improving Terms of Trade of Pakistan. On the other side, Terms of Trade of Pakistan is deteriorated due to real Gross Domestic Product and Real Foreign Direct Investment.

Export boost of Textile Industry of Pakistan by availing EU’s GSP Plus

Pakistan is commonly known as agriculture based economy where vast areas of cultivated lands are producing cotton. This enabled to establish and flourish textile industries in Pakistan, therefore Pakistan is vital part of cheap and quality based textile products exporting country. Recently Pakistan is granted European Union's Generalised Scheme of Preferences (GSP) Plus status as a year from January 2014 by European Union because of that Pakistan's Textile exports surged to $14.22 billion in the fiscal year 2013-2014. This study main focus is on EU’s GSP Plus for textile industry of Pakistan to explore the effects and impact on the international trade, export and economy of Pakistan. The various issues and problems pertaining to the policy, strategy, trade, export and taxes are analyzed and discussed to come up with suggestions. Pakistan Textile sector made $14.22 billion (2013-2014 Jul-Jun) compared to export value of the previous fiscal year, reaching from $13.69 billion in the previous year (July 2012, June 2013). The country's textile exports have been shown in growth of 3.81% in fiscal year (2013 2014 Jul-Jun) as compared to fiscal year of (2012-2013 Jul-Jun). The key motive behind the growth of textile exports is the national GSP plus successful from Jan 2014 because of textile export to the EU which is increased by 18% to reach $ 5 billion figure for the first time in Pakistan history because of the GSP plus status granted by the European Union, and textile exports to the left of the globe fell by 3.5%. Seeing this textile export Pakistan government is ready for a 5-year program to grant subsidies for the textile sector. Under the latest planned textile strategy (2014-19), textile industry will be rewarded. Followed by the strategy, textile exports will increase over the next five years, $ 26 billion, in addition to the creation of employment opportunities. Keywords: European Union's GSP Plus, Textile Export, Fiscal Year, Textile Industry of Pakistan. JEL Classifications: C01, F13, F41, H12, L67, Q41

The Relationship among International Trade, Financial Development and Economic Growth: The Case of Pakistan

Abstract This study is conducted to investigate the relationship among international trade, financial development and economic growth in Pakistan. The ADF and PP tests are used to check the order of integration of the variables and Johansen co-integration methodology is employed to investigate the long run relationship among these variables. The direction of causality between variable is tested by Granger causality test. It is found that all of the variables are non-stationary and the analysis confirm for a long run relationship among international trade, financial development and economic growth. The results indicate that international trade and financial development spur economic growth in Pakistan.

Trade liberalization and Foreign Direct Investment in Pakistan

The paper studies the impact of trade liberalization on foreign di - rect investment (FDI) in Pakistan using quarterly data from 1972 to 2010. The findings suggest that there is a significant positive re - lation between trade liberalization and FDI. The results are ro - bust under alternative trade liberalization measures and differ - ent model specifications. The results indicate that the factors that drive foreign investment have a differential impact on FDI flows to Pakistan. Specifically, human and physical capitals, capital re - turn, infrastructure development, terms of trade and urbanization promote FDI in Pakistan. Foreign debt and inflation lead to de - teriorating foreign investment in the country. Another important finding is that the effect of trade liberalization on FDI has been augmented after the inception of a flexible exchange rate system in Pakistan. However, this result is not robust to alternative equation