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Abstract:
This study explores the potential for expansion of trade flows among Pakistan, Iran, Turkey and Kazakhstan in future, and a possibility of Free Trade Area (FTA) among these countries. We used the country-specific gravity trade model. Through the incorporation of several policy-related variables, our model goes beyond previous studies. The estimated model showed that in addition to the conventional variables of export value, import value, Gross Domestic Product (GDP), per capita GDP and distance, the Consumer Price Index, Common border and the membership in a Preferential Trade Agreement (PTA) influence bilateral trade. The findings of the estimated export and import gravity models support the hypothesis that there is a potential for increase in bilateral trade flows and that there is a potential for an FTA among the Economic Cooperation Organization (ECO) countries.
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