Factors Affecting the Bilateral Trade of Pakistan with Major Trading Partners

Abstract

The current study under hand was aimed to estimate the impact of different factors affecting bilateral trade of Pakistan with its major trading partners. Panel data set about different variables including GDP, per capita income, population and membership of different international organizations were taken from the different sources for the time period of 1995-2016. For this purpose the augmented gravity model of trade has been used by following the fixed and random effects methods. According to the results the product of GDPs, trade to GDP ratio and population of Pakistan have a significant and positive impact on bilateral trade of Pakistan with its major trading partners. Per capita GDPs has positive while distance between trading countries and population of trading partners have negative and insignificant impact on Pakistan`s bilateral trade. Trade organizations also have negative and insignificant impact on Pakistan`s bilateral trade. The gravity theory seems to be ineffective with negative relationship for Pakistan`s bilateral trade.