THE IMPACT OF PREFERENTIAL TRADE AGREEMENTS ON SOUTH ASIAN EXPORT FLOWS: Using Matching Econometrics

This study investigates the effects of preferential trade agreements (PTAs) on export performance of four South Asian countries: Bangladesh, India, Pakistan and Sri Lanka. The study also examines the long-term PTAs’ average treatment effect (ATE) on South Asian export flows with their trade partners (intra and extra) around the world. The study provides a methodological comparison of parametric and non-parametric matching – Propensity Score Matching (PSM) technique. It is evident from the findings of the study that PSM provides more plausible estimates of PTAs. The empirical findings also reveal that PTA increases the South Asian export flows by 129 per cent. Moreover, the intra-regional and extra-regional export increases by 124 per cent and 93 per cent respectively over the period of 1980-2012. The overall findings suggest that PTA formation significantly increases intra and extra regional export flows of South Asian countries. Finally, the study recommends that the government and policymakers should execute more such agreements to boost trade among the regional countries.