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Abstract
We estimated the import and export elasticities of Pakistan trade with traditional trade
partners and some Asian countries to see the dynamics of Pakistan trade from 1973
to 2008. OLS results suggest that income is the principal determinant of exports and
imports. Pakistan exports are cointegrated with Japan and USA while the imports are
cointegrated with UAE and USA. Pakistan imports and exports are cointegrated with
Bangladesh and Sri Lanka but not with India and China. Income and exchange rate
are both important determinants of foreign trade. Continuing its trade with traditional
partners and making efforts for greater market access to USA and EU, Pakistan
should make efforts to increase its trade with Asian countries notably China and India
because both are fast growing economies and have huge market.