Institutional Determinants of Bilateral Trade Flows: A Panel Data Analysis
DOI:
https://doi.org/10.26710/reads.v4i2.409Keywords:
ECO, Bilateral Trade Flows, Panel Data, Institutional Quality, Institutional Homogeneity, Gravity Trade ModelAbstract
This study analyzes the institutional determinants of bilateral trade flows and homogeneity effect for Pakistan with ECO countries by using panel data for years 2003-2014. Gravity trade model is estimated through panel least squares technique. Impact of institutions is very important for international trade as international businesses involve many governance systems. The results show that average impact of institutional quality and bilateral trade flows is positive. Moreover, institutional homogeneity effect exhibits that bilateral trade flows are positively related with the governance similarity. Thus, institutional quality and institutional homogeneity has dominant impact on the bilateral trade flows.
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