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Does Peace Promote Bilateral Trade Flows? An Economic Analysis of Panel Data in Asian Perspective

Ghulam Shabbir (), Amjad Naveed, Muhammad Ali Khan () and Shabib Haider Syed ()
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Ghulam Shabbir: Forman Christian College University Lahore
Muhammad Ali Khan: Forman Christian College University Lahore
Shabib Haider Syed: Minhaj University Lahore

Comparative Economic Studies, 2022, vol. 64, issue 1, No 6, 143-158

Abstract: Abstract This study investigates the effect of peace on the bilateral trade flows of Pakistan under the framework of the gravity model. Specifically, we tested the impact of peace (using the Global Peace Index) in Pakistan relative to its 26 trading partners on trade flows from 2007 to 2018. Using system GMM estimation procedure that takes care of endogeneity issues, this study shows that the standard gravity model does not hold in the case of Pakistan. Therefore, it is important to investigate whether the peace in Pakistan and its trading partner promotes trade in the regions. Furthermore, the results indicate that a rise in the prevalence of peace in Pakistan relative to its trading nation has significantly and positively contributed to its trade flows. Besides, development of infrastructure improves trade flow due to low transportation cost. From a policy perspective, reducing conflict and promoting peace will further encourage neighboring countries to enhance trade relations, which will be beneficial for the whole region.

Keywords: Trade flows; Peace; Infrastructure; Gravity model; System GMM (search for similar items in EconPapers)
JEL-codes: F14 F15 F51 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41294-021-00155-2

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