Assessing the Determinants of Services Exports of Pakistan
An Application of Extended Gravity Model
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https://doi.org/10.48112/aessr.v4i4.925Abstract
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The services sector plays a crucial role in Pakistan's economy based on its contribution to GDP and the engagement of most of the labour force with this sector. Services exports provide valuable foreign exchange earnings, and the focus on promoting services exports can resolve the balance of trade issue. Hence, this study investigates the key determinants influencing Pakistan's services exports with its major trading partners. The study employed an extended gravity model through fixed effect, random effect and Poisson-Pseudo Maximum Likelihood (PPML) methods by using data from 2000-2022 and found out that the GDP of the partner country, FDI, employment in services, logistics performance index (LPI), and services trade restrictiveness index (STRI) are important determinants of services exports in Pakistan. Pakistan is the most restrictive economy in the South Asian region which has higher STRI, resultantly the restrictions are negatively affecting the services trade and exports of the country. Moreover, the study evaluated that the USA, UAE, China, and UK are major export markets for export services of Pakistan. Based on these findings, the study suggests that Pakistan should improve its logistics infrastructure and reduce service trade restrictions to boost services exports.
Keywords:
Extended gravity model, Information and communication technology, Service trade restrictiveness index, Services exports, Services tradeReferences
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