Does Governance Wax or Wane the Bilateral Trade of Pakistan? An Application of Gravity Model

Анотація


 
 
 
 Purpose: This paper aims to present an analysis on the effect of governance and its indicators on bilateral exports and bilateral imports of Pakistan with its major trading partner countries separately.
 Theoretical framework: This study has implemented the six indicators of governance for Pakistan and its exporting and importing partners in gravity trade model to demonstrate the influence of governance on bilateral trade.
 Design/methodology/approach: Indicators of governance (a disaggregate analysis) and a governance index (an aggregate analysis) in a panel data over the period 2000 to 2020 have been analyzed by using panel least square estimation technique.
 Findings: The findings reveal that the average effect of governance on bilateral exports is positive indicating that in general, the better quality of institutions boosts up the bilateral trade, and the outcome of the institutional quality on trade has “waxed rather than waned” with time. Further, the positive effect of governance on bilateral imports indicates that it is uncomplicated to trade with those trading partners having better institutions.
 Research, Practical & Social implications: Research, Practical & Social implications: This study suggests that there is a clear need to adopt the practices of good governance,accountability, rule of law, etc. for enhancing bilateral trade and would follow the rules developed by the institutions.
 Originality/value: This study is an attempt to examine the significance of governance in enhancing the bilateral trade of Pakistan. Findings of the study has elaborated with the economic reasonings that have never been explained in previous researches.
 
 
 

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