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Gravity model: An application to trade between regional blocs

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  • Inmaculada Martinez-Zarzoso

Abstract

The objective of this paper is to evaluate the determinants of bilateral trade flows among 47 countries and, particularly, the effects of preferential agreements between several economic blocs and areas: European Union (EU), North-American Free Trade Area NAFTA), Caribbean Community (CARICOM), Centro-American Common Market (CACM), and other Mediterranean countries (MEDIT). The period under study is from 1980–99. The authors estimate a gravity equation that allows the comparison of the weight of the influence of preferential agreements and also, infers the relevance of other determinants of bilateral trade flows such us geographic proximity, income levels, population, and cultural similarities. The analysis is undertaken for each year of the sample in order to capture the temporal evolution of the impacts on trade of the different variables considered. Using the estimation results as a base, trade potentials resulting from new free trade agreements are calculated. Copyright International Atlantic Economic Society 2003

Suggested Citation

  • Inmaculada Martinez-Zarzoso, 2003. "Gravity model: An application to trade between regional blocs," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 31(2), pages 174-187, June.
    • Handle: RePEc:kap:atlecj:v:31:y:2003:i:2:p:174-187
    DOI: 10.1007/BF02319869
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    3. Festus Ebo Turkson, 2012. "Trade Agreements and Bilateral Trade in Sub-Saharan Africa: Estimating the Trade Effects of the EU-ACP PTA and RTAs," Discussion Papers 12/07, University of Nottingham, CREDIT.
    4. Byambasuren, Tsenguunjav & Gochoo, Munkh-Erdene, 2015. "Optimizing the Structure of Mongolian Foreign Trade and the Alternative Policy of Successful Transition," MPRA Paper 61803, University Library of Munich, Germany.
    5. Ana Lúcia Marto Sargento, 2007. "Empirical Examination of the Gravity Model in two Different Contexts: Estimation and Explanation," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 27(2), pages 103-127, August.
    6. Azmat Gani, 2010. "Some Aspects of Trade between Australia and Pacific Island Countries," The World Economy, Wiley Blackwell, vol. 33(1), pages 89-106, January.
    7. Cardamone, Paola, 2007. "A Survey of the Assessments of the Effectiveness of Preferential Trade Agreements using Gravity Models," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 60(4), pages 421-473.
    8. Gani, Azmat & Scrimgeour, Frank, 2016. "New Zealand's trade with Asia and the role of good governance," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 36-53.
    9. Diagne, Mandiaye & Abele, Steffen & Diagne, Aliou & Seck, Papa Abdoulaye, 2013. "Agricultural trade for food security in Africa: A Ricardian model approach," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161466, African Association of Agricultural Economists (AAAE).
    10. Peridy, Nicolas, 2005. "The trade effects of the Euro-Mediterranean partnership: what are the lessons for ASEAN countries?," Journal of Asian Economics, Elsevier, vol. 16(1), pages 125-139, February.
    11. Josheski, Dushko & Apostolov, Mico, 2013. "Macedonia’s exports and the gravity model," MPRA Paper 48180, University Library of Munich, Germany.
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    13. Jose Pavía & Bernardi Cabrer & Luis Vila, 2006. "Interregional Trade Linkages and the Commercial Role: The Spanish Case," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(1), pages 91-103, February.

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