ASSESSING THE IMPACT OF ECONOMIC SIZE, DISTANCE AND TRADE AGREEMENTS ON PAKISTAN'S EXPORTS: EVIDENCE FROM A GRAVITY MODEL APPROACH

Abstract

Economic integration through global trade is a powerful driver of growth and productivity and brings developing economies into the fold of the worldwide marketplace. Pakistan possesses a myriad of resources for trade yet has not experienced the same level of export growth as other developing markets. To develop trade policy, it is crucial to identify the factors that impact export performance in Pakistan. Using the international trade Gravity Model, this research aims to analyze the effects of trade size, distance, and agreements on the exports of Pakistan. The Gravity Model asserts that trade flows have a positive correlation to the trade size of the countries and a negative correlation to the distance that separates the countries. Furthermore, export performance is impacted by the extent to which trade agreements (of a regional or bilateral nature) are implemented, as these overcome barriers to trade and lessen cost disparities. The panel data will cover the years 2000 to 2026 and will include the primary trading partners of Pakistan. The size of the economy is represented by Gross Domestic Product (GDP). Distance is conceptualized as the cost of information and transportation. A dummy variable will represent SAFTA, CPFTA, and other trade agreements. The effects of zero trade and heteroscedasticity will be mitigated by the Poisson Pseudo Maximum Likelihood (PPML) estimator in the equation. The study concludes with policies to increase Pakistan's export competitiveness and enhance its integration into global value chains.