Exchange deficiencies are just the aftereffect of a larger number of imports thansends out for an economy in a specific period. In any case, the basic causes can beconvoluted, changing period by period (and nation by nation). It is generally hard todistinguish the causes from the impacts because numerous variables connect at thesame time (Pingfan, 2001).
Figure: 1 Intraregional trade as a share of gross domestic product in 2006
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2.2 SouthAsia Free Trade Area (SAFTA)
The exchange organizations that advanced amongst the South Asian nationsprobably will not encourage a fast increment in intraregional exchange because offeeble exchanging relations among the SAARC nations (Pitigala, 2005). This viewwas bolstered by an investigation of Baysan, et al. (2006). They contended that thefinancial cases for SAFTA were moderately frail. From a financial point of view,neither a subjective contention nor a quantitative appraisal that was accessible to giveone explanation to feel excited about the course of action. Also, contrasted with theremainder of the world, this locale was minor both as far as monetary size asestimated by GDP (and per capita salary) and the offer on the planet exchange.Hence, exchange inclinations to the local accomplices would probably be promptingan outcome of exchange preoccupation as opposed to exchange creation. Essentially,the proof of exchange correspondingly in South Asia is blended, so exchangingactivity depended on a powerless suggestion (Das, 2007).
As of late, new farmer and Pierola (2007) found that the courses of action ofparticular exchanging South Asia including SAFTA missed the mark regarding theirpotential in light of item exceptions, extraordinary game plans for chosen items andprohibitive standards for purpose of root. In this manner, however upside possibilitiesfor SAFTA were extraordinary, profits by this exchanging course of action weredubious. Thus, the approach creators will require steady assurance to make it fruitfulin future. Bader (2006) contemplated the consequence of exchange shortage (faresand imports) on the development of a nation. The point of this investigation was toevaluate the connection among fare and exchange deficiency.
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CHAPTER 3: AN OVERVIEW OF THE SAARC ECONOMIES ...............................24
3.1 TRENDS AND PATTERNS IN INTRAREGIONAL TRADE IN SOUTH ASIA ........................27
3.2. TRADE SURPLUS/DEFICIT &REMITTANCES .........................29
CHAPTER 4: RESEARCH METHODOLOGY ............................31
4.1 THEORETICAL FRAMEWORK ...................31
(I) EXPORT ..............................31
(II) IMPORT ................................31
CHAPTER 5: RESULTS AND DISCUSSION .............................40
5.1 DETERMINANTS OF TRADE DEFICIT ...........................40
5.2 ROBUSTNESS CHECK WITH ALTERNATIVE METHODOLOGY ...........................47
Chapter 5: Results and Discussion
5.1 Determinants of Trade Deficit
Before observing in the long and short run potential effect of the independentvariables on trade deficit, it is important to make the check the stationary of theregressors and regressend in such a way that the variable(s) are stationaries at 1(1)and I(0). If the selected variable(s) are stationary at 1(2)Then the results are not valid(Ouattara 2004).Therefore, Levine et al. (2002) and I’m et al. (2003) unit root tests isutilized to analyze the request for joining between the picked factors. He brings ab
