Abstract

Assessing the trade potential of Pakistan- Sri Lanka under free trade agreement: input-output model and to check the long-term Johansen cointegration analysis. The study uses the input-output model and Johansen cointegration on time series data to assess the Pakistan-Sri Lanka long term trade relation under the assigned FTA. The study was based on secondary data collected from World Bank and duration from 1988 to 2020. The study also checks the comparative index and revealed comparative index. Fully modify ordinary least squares (FMOLS) is used as it is best adapted for Cointegration Regressions. These independent variables Exports, GDP Per Capita, food and Imports are positively but Terrorism Index are negatively correlated with dependent variable trade. Also, the independent variables Exchange Rate, Exports, GDP Per Capita, Imports, food and Terrorism Index are significantly affecting the dependent variable trade in the long run.