Open Access Journal Article

Analyzing Bilateral Trade Dynamics between Azerbaijan and Pakistan: A Robust Least Squares Regression Approach

by Ibrahim Niftiyev a,*
a
Department of International Economics and Business, Azerbaijan State University of Economics (UNEC), Baku, Azerbaijan
*
Author to whom correspondence should be addressed.
JEA  2024, 86; 3(4), 86; https://doi.org/10.58567/jea03040012
Received: 29 January 2024 / Accepted: 26 February 2024 / Published Online: 29 February 2024
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Abstract

The diplomatic relations between Azerbaijan and Pakistan have undergone significant development since the late 1990s. Despite some studies focusing on diplomatic and political relations, the economic dimension of this partnership has not been systematically covered. In this paper, a robust least squares (RLS) approach is used to model bilateral trade between the two countries and identify statistically significant determinants, including economic, institutional, and cultural factors, after analyzing the main economic and subsectoral trade dynamics of both countries. The results reveal that Azerbaijan's imports from Pakistan are significantly associated with the country's higher income and market size, while Pakistan's elevated exchange rate and trade costs hinder bilateral trade. In addition, Pakistan's rising manufacturing output increases exports to Azerbaijan but decreases imports from Azerbaijan. Among institutional determinants, government effectiveness, the trade freedom index (TFI), and political stability play significant roles in bilateral trade. Lastly, it was found that cultural proximity increases Pakistani exports to Azerbaijan but not imports from Azerbaijan. The analysis also indicates that domestic savings stimulate Pakistani exports. These findings underscore the complex nature of bilateral trade between Azerbaijan and Pakistan and highlight the need for institutional arrangements to harmonize trade flows and boost welfare gains from trade. The results may be of great importance to intergovernmental working groups, domestic policymakers, and businesses.

Keywords: Azerbaijan; Bilateral trade; Robust least squares; Pakistan;
Copyright: © 2024 by Niftiyev. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Niftiyev, I. Analyzing Bilateral Trade Dynamics between Azerbaijan and Pakistan: A Robust Least Squares Regression Approach. Journal of Economic Analysis, 2024, 3, 86. https://doi.org/10.58567/jea03040012
AMA Style
Niftiyev I. Analyzing Bilateral Trade Dynamics between Azerbaijan and Pakistan: A Robust Least Squares Regression Approach. Journal of Economic Analysis; 2024, 3(4):86. https://doi.org/10.58567/jea03040012
Chicago/Turabian Style
Niftiyev, Ibrahim 2024. "Analyzing Bilateral Trade Dynamics between Azerbaijan and Pakistan: A Robust Least Squares Regression Approach" Journal of Economic Analysis 3, no.4:86. https://doi.org/10.58567/jea03040012
APA style
Niftiyev, I. (2024). Analyzing Bilateral Trade Dynamics between Azerbaijan and Pakistan: A Robust Least Squares Regression Approach. Journal of Economic Analysis, 3(4), 86. https://doi.org/10.58567/jea03040012

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