Possibilities of Regional Trade Expansion: A Link Model for Pakistan, India, Bangladesh and Sri Lanka

Econometric models are generally constructed for a specific country on the assumption that national economies are independent. In reality, this is not the case. In this paper, we have constructed prototype linkage econometric models for Pakistan, India, Bangladesh and Sri Lanka, These models are linked to each other through foreign-trade equations to explore possibilities of fruitful economic cooperation among these four countries Policy simulations, carried out to highlight the pay-off of specific policies in terms of the stated objective, show that, given the resolve of these countries to extend the area of collaboration, the prospects are by no means dim. There is also the extra bonus that the growth of GNP in the region will also be helped by mutual economic co-operation. The need for conscious policy decisions to this effect has been underscored.

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