Impact of Transport Infrastructure Development under BRI on Trade: A Case Study of CPEC in the Context of Pakistan

Abstract

The study is conducted with the objective of analyzing transport infrastructure impact on Pakistan’s trade volume, especially infrastructure developed under the China Pakistan Economic Corridor (CPEC) project of the Belt and Road Initiative (BRI). The study is conducted in two phases. In the first phase, the study explains infrastructure development’s impact on the trade volume in Pakistan, without taking into account the CPEC, by utilizing time-series data from 1991 to 2020 by employing the ARDL model. The results confirm that trade has significantly increased with infrastructure development. For robustness of these results Granger Causality test is carried out, which confirms that the results are robust. Similarly, in the second stage of the study, the impact of CPEC and transport infrastructure development has been checked on Pakistan’s trade from 1991 to 2020 by applying the Ordinary Least Square techniques model. From results, we find out that CPEC and transport infrastructure development have a significant positive impact on Pakistan’s trade promotion. Along with the main variable, some control variables such as foreign direct investment, exchange rate, Institution quality, and population also have a significant positive impact on trade promotion, but still in some cases, their impact is insignificant. This study explored a new dynamic measurement of transport infrastructure by including qualitative variables in the construction of transport infrastructure index, based upon this new measured transport infrastructure index, we concluded that CPEC has significant impact on Pakistan’s trade volume.