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Does Peace Promote Bilateral Trade Flows? An Economic Analysis of Panel Data in Asian Perspective

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Abstract

This study investigates the effect of peace on the bilateral trade flows of Pakistan under the framework of the gravity model. Specifically, we tested the impact of peace (using the Global Peace Index) in Pakistan relative to its 26 trading partners on trade flows from 2007 to 2018. Using system GMM estimation procedure that takes care of endogeneity issues, this study shows that the standard gravity model does not hold in the case of Pakistan. Therefore, it is important to investigate whether the peace in Pakistan and its trading partner promotes trade in the regions. Furthermore, the results indicate that a rise in the prevalence of peace in Pakistan relative to its trading nation has significantly and positively contributed to its trade flows. Besides, development of infrastructure improves trade flow due to low transportation cost. From a policy perspective, reducing conflict and promoting peace will further encourage neighboring countries to enhance trade relations, which will be beneficial for the whole region.

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Notes

  1. For details of variables and respective data sources and country list, see appendix Table 3 and 4.

  2. The pooled OLS results are available on request.

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Acknowledgements

The authors thank the editors and two anonymous referees for their valuable comments and suggestions.

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Correspondence to Amjad Naveed.

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Appendix

Appendix

See Tables 3

Table 3 Variable, definition and data source

and 4

Table 4 List of countries

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Shabbir, G., Naveed, A., Khan, M.A. et al. Does Peace Promote Bilateral Trade Flows? An Economic Analysis of Panel Data in Asian Perspective. Comp Econ Stud 64, 143–158 (2022). https://doi.org/10.1057/s41294-021-00155-2

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