IMPACT OF GRAVITY MODEL ON TRADE BETWEEN CHINA AND PAKISTAN: A CASE OF CPEC BETWEEN CHINA AND PAKISTAN
To find out the trade flow among different economies, the gravity model has been applied in various researches in different regions of the world. The present study has applied the Gravity model to analyze the bilateral trade patterns between China and Pakistan. The secondary panel data was collected from 2009 and 2018. The variables used in the study were Distance, Inflation, Gross Domestic Product (GDP), and GDP per capita, Exchange Rate. The data was collected from the official websites of State Bank of Pakistan, the Pakistan Economic Survey, and the Pakistan Stock Exchange. The fixed effect regression model was used for analysis. The results showed that the Distance, GDP growth, GDP per capita had an insignificant impact on the Trade Flow between China and Pakistan. The Exchange Rate and Inflation showed a positive and significant effect on trade between China and Pakistan. The results recommended that further studies should be done targeting other potential variables with different mediating and non-mediating roles.
Keywords:Gravity Model Trade, CPEC