Abstract
This study analyzes the economic determinants of bilateral trade flows and trade potential of Pakistan with ECO member countries by using panel data for years 2003-2014. Gravity trade model is estimated through panel least squares technique and trade potential is calculated through Predicted to Actual trade ratio method. The results show that Pakistan’s bilateral trade flows with ECO member countries are positively correlated with GDP, trade openness, and border while negatively correlated with distance, per capita GDP, exchange rate, inflation rate, and landlocked. The study also reveals that Pakistan has potential to expand its trade with Azerbaijan, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan. Supportive measures are needed to exploit the unrealized potential of trade in ECO region. Trade should be further liberalized through reduction in tariff barriers and non-tariff barriers.
Keyword(s)
ECO, Bilateral Trade Flows, panel data, Trade Potential, Gravity Trade Model