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.
Contribution/ OriginalityThis study is one of very few studies which have investigated and highlighted the opportunities for Pakistan's economy from free trade agreement among Pakistan-ASEAN-China. This study also revealed that Pakistan can get advantage from ASEAN at large scale. Moreover, China's recent investment in Pakistan will create long terms benefits for Pakistani Nation.
Article History
JEL Classification:N70, C23, F13In this study, we have endeavoured to explain China"s trade pattern with OPEC member countries by employing gravity model over the period . The estimation results demonstrate that the gravity equation fits the data pragmatically. China was the first biggest oil importer worldwide with about 73 per cent of her oil coming from OPEC member countries. In fact, energy can be considered as the most traded commodity and also the core reason for the trade volume growth between China and the OPEC member countries in last two decades. We have confirmed that China"s bilateral trade with OPEC members positively impacts on GDP, income (GDP per capita), trade openness in China and the WTO member countries in OPEC. While negatively influence on distance (trade cost) and supports Linder hypothesis. Depreciation in bilateral exchange rates also negatively influence on China"s bilateral trade with OPEC.
Contribution/ Originality:To the best of the authors" knowledge, this study is the first attempt to examine the China"s trade pattern with 14 OPEC member countries aver the period of 1990-2016 through gravity approach by estimation technique OLS and time fixed effects.
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