ABSTRACT

The objective of this research study is to analyze the effect of the tariff gap of the South Asia Free Trade Agreement (SAFTA) on the exports of Pakistan using the extended gravity model of bilateral trade flows for the time period of 2006 to 2016. The tariff gap has been measured by finding the difference between MFN and preferential tariff rates as well as the zero-one binary dummy variable. The control variables used in this study are tariff rate, regional geographical distances, population, exchange rate & GDP while total exports of Pakistan is the dependent variable. The findings show that in both models PPML (Poisson Pseudo Maximum) & NB (Negative Binominal) the impact of the SAFTA tariff gap on the exports of Pakistan is negative at a 1% significance level.