Export and import potentials of Pakistan to other SAARC countries in gravity panel data models

Abstract

Pakistan's export and import potential to other SAARC nations has been calculated with the help of gravity model using panel data methodology (pooled model, fixed effect model and random effect model) by taking the time period 1981-2005. The study revealed that there was presence of convergence in Pakistan's exports as well as imports with SAARC countries and in the other words, actual Pakistan's exports and imports to SAARC countries converged towards the estimated export and import potential. Pakistan had convergence in exports with four SAARC members (Bhutan, India, Maldives and Nepal) and divergence with two SAARC members (Bangladesh and Sri Lanka). Regarding imports, Pakistan had convergence in imports with two SAARC members (Bangladesh and India) and divergence with two SAARC members (Nepal and Sri Lanka). The study suggested that greater stability in the international exchange system would also help to increase prospects for trade and investments of SAARC countries.