Intra Industry Trade of Pakistan

Abstract

This paper focuses on the casual relationship between Intra industry trade (IIT) of Pakistan and Its determinants. The data for estimating intra industry trade, using G-L index technique, is extracted from United Nation Commodity Trade (UN Comtrade) and data for its determinants, is taken from World Development Index. The data set is from 1980 to 2012. The data set is been tested through UNIT ROOT test for Stationarity, Co-integration and in end Ganger Causality test. This paper is an extension to the previous work of the authors. The extracted data is found to be stationary at 1^st difference and is tested through IPS and ADF fisher unit root tests. The result shows that there is only uni-directional causality between IIT and absolute difference between per capita GDP of Pakistan and its trading partners. While the geographical distance between Pakistan its partners have two-way causality with difference between the market size of the Pakistan and its trading countries. On the other hand the determinants have uni-directional causality between them.