Gravity model. PIFC exports A standard gravity model with three-way error components is tailored to the circumstances in the PIFCs. The equation is estimated using data for 1990-2012 covering the six PIFCs as exporting countries and more than 100 countries as importing countries. The equation is estimated with the random effects estimator. All estimated coefficients have the expected signs with R2 = 0.47. ijt it jt ij ij ij lnXˆ = 11.09 + 0.39lnGDP + 0.46lnGDP – 1.92lnDIST + 0.36F + 1.49C + 0.29APTAj z = (7.03) (7.29) (13.01) (-14.14) (3.97) (3.24) (0.99) Where Xijt stands for a PIC i ’s exports to country j at time t; GDPit is the GDP of export country i at time t, and GDPjt is the GDP of importing country j at time t; Fij is a dummy variable indicating if countries i and j are both signatories of the same preferential trade agreement (Fij = 1 if both countries are signatories, and Fij = 0 if they are not); Cij indicates if countries i and j share colonial ties, with binary values 1 and 0 indicating existence and absence of such ties, respectively; and APTAj is another binary variable with 1 indicating the trade partner is an APTA member and 0 otherwise. Other factors are found insignificant in the above panel framework. Annual data are obtained from the World Bank World Development Indicators database. Focusing on the linkage between APTA and PIFCs, the binary variable APTAj shows a positive relationship with a factor of 0.29, suggesting that, given other circumstances remaining fixed or constant, PIFCs’ exports to Participating States of APTA are 29% higher than their exports to other countries. Although such a positive effect is not statistically significant, it suggests that given favourable trade environments it is possible for PIFCs to export more to APTA Participating States.10
Gravity model. PIFC imports Following a similar gravity model as that in section C.1(c), a gravity model is employed to explain the six PIFCs’ imports during 1990-2012. The equation is estimated with the random effects estimator. All estimated coefficients have the expected signs with R2 = 0.48. ijt it jt ij ij ij lnˆM = -8.86 + 0.66lnGDP + 0.61lnGDP – 2.27lnDIST + 0.37F + 0.70C + 0.19APTAj z = (-6.33) (14.24) (22.08) (-18.34) (5.71) (1.57) (0.67) Where Xijt stands for a PIC i’s imports from a country j; GDPit is the GDP of import country i, and GDPjt is the GDP of export country j; DISTij is capital to capital distance between countries i and j; Fij is a dummy variable indicating if countries i and j are both signatories of the same preferential trade agreement (Fij = 1 if both countries are signatories, and Fij = 0 if they are not); Cij indicates if countries i and j share colonial ties, with binary values 1 and 0 indicating existence and absence of such ties, respectively; and APTAj is another binary variable with 1 indicating trade partner is an APTA member and 0 otherwise.
