India’s trade with South and Central Asia: an application of institution-based augmented gravity model

Suadat Wani and Effat Yasmin ()
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Effat Yasmin: University of Kashmir

Future Business Journal, 2023, vol. 9, issue 1, 1-12

Abstract: Abstract The present study investigates the effect of regional and bilateral trade agreements supported by institutional framework on bilateral trade between India and selected South and Central Asian countries. The augmented gravity model that corrects for zero trade, endogeneity and heterogeneity is used. The model is developed by applying OLS and PPML (Poisson pseudo-maximum likelihood) estimation technique using panel dataset of 22 countries from 1996 to 2020. Empirical results show that trade agreements have failed to enhance trade between selected countries. However, institutional framework positively contributes to trade integration among these countries. The key finding of this study is that regional trade agreements supported by institutional framework play an important role in promotion of trade among these countries. Thus, the government needs to pay attention to enhance institutional quality to reap the benefits of trade integration.

Keywords: Regional integration; Gravity model; Institutional framework; Panel data; South Asia (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1186/s43093-023-00257-6

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