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Regional Integration in South Asia: An Analysis of Trade Flows Using the Gravity Model

Naseem Akhter and Ejaz Ghani ()
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Naseem Akhter: Pakistan Institute of Development Economics, Islamabad

Authors registered in the RePEc Author Service: Naseem Faraz ()

The Pakistan Development Review, 2010, vol. 49, issue 2, 105–118

Abstract: The study deals with trade benefits from the free trade agreement of the SAARC countries. It assesses the trade potential and trade creation with member and non-member countries. The gravity model has been used to measure the bilateral trade flows and to assess the trade effect for member and non-member countries. Two analyses estimate the gravity model. The first analysis is based on cross-sectional data to capture the trade effect individually each year; and the second analysis utilises the pooled data to measure the overall trade effects and trade flows for the period 2003 to 2008. The results from the two approaches show that estimated coefficients are consistent with the model assumptions. Both analyses show that the regional trade agreement of the SAARC countries could divert the trade for member countries as well as for the non-member countries. However, trade volume will increase only if the major partners (Pakistan, India, and Sri Lanka) sign regional trade agreements.

Keywords: Trade; Regional Integration; Gravity Model (search for similar items in EconPapers)
JEL-codes: F15 (search for similar items in EconPapers)
Date: 2010
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