Post by Sapphire Capital on Jul 25, 2008 3:59:02 GMT 4
Pakistan's Export Potential: A Gravity Model Analysis
Waheed Akram Butt
Analyst
State Bank of Pakistan
waheed.akram@sbp.org.pk
Abstract
The study employs Gravity Model to estimate Pakistan’s export potentials with the global and
bilateral trading partners for the 19 sectors of the economy. We use cross sectional data for
132 exporting and 154 importing countries for the years 2002-03. The study applies the
pseudo maximum likelihood methodology to estimate the gravity equation. The results depict
that the model fits well with the data and estimation provides reasonable signs and results for
distance, geographical, cultural and historical factors employed in the analysis.
On the aggregate level, the model identifies highest export potentials with the countries such
as India, Japan, Hong Kong, China and USA whereas Pakistan is exhausting its export
potentials with some countries namely UK, Turkey and Bangladesh. On the sectoral level,
the bilateral results reveal additional export potential for 13 out of 15 sectors with India.
Similarly, the sectoral results for China also unveil untapped potentials for Pakistani exporters
in 10 out of 15 sectors.
www.sbp.org.pk/publications/wpapers/2008/wp23.pdf
Waheed Akram Butt
Analyst
State Bank of Pakistan
waheed.akram@sbp.org.pk
Abstract
The study employs Gravity Model to estimate Pakistan’s export potentials with the global and
bilateral trading partners for the 19 sectors of the economy. We use cross sectional data for
132 exporting and 154 importing countries for the years 2002-03. The study applies the
pseudo maximum likelihood methodology to estimate the gravity equation. The results depict
that the model fits well with the data and estimation provides reasonable signs and results for
distance, geographical, cultural and historical factors employed in the analysis.
On the aggregate level, the model identifies highest export potentials with the countries such
as India, Japan, Hong Kong, China and USA whereas Pakistan is exhausting its export
potentials with some countries namely UK, Turkey and Bangladesh. On the sectoral level,
the bilateral results reveal additional export potential for 13 out of 15 sectors with India.
Similarly, the sectoral results for China also unveil untapped potentials for Pakistani exporters
in 10 out of 15 sectors.
www.sbp.org.pk/publications/wpapers/2008/wp23.pdf