Free Trade and Gravity Model

2020 ◽  
pp. 60-90
Author(s):  
Nerajda Feruni ◽  
Eglantina Hysa
Keyword(s):  
Gravity Model ◽  
Free Trade ◽  
Trade Agreement ◽  
Economic Thought ◽  
Trade Flows ◽  
Theoretical Development ◽  
Central European ◽  
The Subject ◽  
The Impact ◽  
Trade Partners

The purpose of this chapter is to build and explain the Gravity Model for the trade flows of Albania and 15 of its trade partners for the period of 2001-2016, both theoretically and empirically. The theoretical development of the subject gives an overview of the economic thought over the years regarding the concept of free trade, its benefits and threats, the Central European Free Trade Agreement (CEFTA), and the Gravity Model in order to be able to explain and interpret the patterns of trade between countries. The econometrical analysis illustrates the impact of gross domestic product (GDP) of partner countries, the distance between them, and CEFTA has on the trade flows of Albania. The Gravity Model built in this study supports the theoretical approach and it shows how GDP has positively affected trade flows, while distance has negatively affected trade flows. The impact of CEFTA is insignificant.

scholarly journals Estimating the Impact of ASEAN China Free Trade Agreement on Indonesia’s Trade Balance

2019 ◽  
Vol 1 (1) ◽  
pp. 18-37
Author(s):  
Muhammad Arif Junaidi
Keyword(s):  
Gravity Model ◽  
Free Trade ◽  
Significant Role ◽  
Trade Balance ◽  
Free Trade Agreement ◽  
Trade Agreement ◽  
Trade Flows ◽  
Insignificant Effect ◽  
Asean Countries ◽  
The Impact

Using trade flows data of ASEAN countries and China from 2002 to 2017, this studyestimates the impact of ACFTA on ASEAN countries and China’s trade balance in general,and also for Indonesia’s trade balance in specific by elaborating the impact of ACFTA onthe trade flows both exports and imports. Using the gravity model and estimating by OLSand PPML, this paper finds that the impact of tariffs elimination due to the implementationof ACFTA increased exports and imports for ASEAN countries and China in general, andfor Indonesia in particular. However, the aggregate trade balances of ASEAN membercountries and China is zero since the impact of ACFTA on imports offset the impact ofACFTA on exports. Tariff’s elimination due to the implementation of ACFTA on Indonesiashows a negative and statistically insignificant effect on imports and exports. Thus, tariffshave not played significant role on increasing Indonesia’s exports and imports. As a result,the impact of ACFTA on Indonesia’s trade balance cannot be quantified clearly since theimpact of tariffs on exports and imports are not significant.

scholarly journals Recent Experience and Future Prospects of Pakistan’s Trade with China

2009 ◽  
Vol 14 (Special Edition) ◽  
pp. 87-110 ◽  
Author(s):  
Musleh-ud Din Musleh-ud Din ◽  
Ejaz Ghani ◽  
Usman Qadir
Keyword(s):  
Gravity Model ◽  
Free Trade ◽  
Free Trade Agreement ◽  
Bilateral Trade ◽  
Trade Agreement ◽  
Trade Flows ◽  
Recent Experience ◽  
Future Prospects ◽  
Short Term ◽  
Bilateral Trade Flows

This paper examines the prospects of expanding bilateral trade between Pakistan and China particularly in the context of the recently signed free trade agreement between the two countries. Using the augmented gravity model in the tradition of Rose (2004), the paper shows that there is significant potential for the expansion of bilateral trade between the two countries as a result of the free trade agreement. The paper also analyzes bilateral trade flows between the two countries in terms of a trade specialization index and the Grubel-Lloyd index of intra-industry trade. We show that bilateral trade between the two countries is heavily tilted in favor of China and that this situation may persist in the short term.

How Free Trade Agreements Affect Exports and Imports in Vietnam

2017 ◽  
Vol 33 (5E) ◽  
Author(s):  
Nguyen Thi Hoang Oanh
Keyword(s):  
International Trade ◽  
Free Trade ◽  
World Economy ◽  
Free Trade Agreement ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Trade Agreements ◽  
Trade Flows ◽  
Hub And Spoke ◽  
The Impact

The important year of 1995 marked Vietnam’s first integration as a member of ASEAN. By 2016, Vietnam had negotiated, signed, and implemented sixteen free trade agreements. They include both multilateral and bilateral free trade agreements such as the China-ASEAN, Vietnam-Chile, and Vietnam-Japan agreements. By signing free trade agreements Vietnam can increase trade flows in bilateral and multilateral developed-country FTA scenarios. Trade creation and diversion can be found in multilateral developing-country FTA scenarios and the author finds the impacts of each free trade agreement is different if analyzed for each 2-digit commodity. Keywords Free trade agreement, trade, import, export.t commodity References [1] Baier, S.L., Bergstrand, J.H., “Do free trade agreements actually increase members’ international trade?”, Journal of International Economics, 71 (2007), 72-95.[2] Chong, Soo Yuen & Hur, Jung, “Small Hubs, Large Spokes and Overlapping Free Trade Agreements”, The World Economy, 10.1111/j (2008), 1467-9701.[3] Hur, J., Alba, J. D., & Park, D., “Effects of hub-and-spoke free trade agreements on trade: A panel data analysis”, World Development, 38 (2010) 8, 1105-111.[4] McDonald, S. & Walmsley, Terrie, “Bilateral Free Trade Agreements and Customs Unions: The Impact of the EU Republic of South Africa Free Trade Agreement on Botswana”, The World Economy, 10.1111/j (2008),1467-9701.[5] Pan, S., Welch, M., Mohanty, S., Fadiga, M., & Ethridge, D., “Welfare analysis of the Dominican Republic-Central America-United States free trade agreement: The cotton textile and apparel industries”, The International Trade Journal, Vol. XXII (2008) 2, 1521-0545.[6] Benedictis, L., Santis, R., Vicarelli, C., “Hub-and-Spoke or else? Free trade agreements in the “enlarged” European Union”, The European Journal of Comparative Economics, 2 (2005) 2, 245-260.[7] Nguyen, Q.H., & Nguyen, T.H., “The impact of free trade agreement on trade flow of goods in Vietnam”, Vietnam Economist Annual Meeting, 2015[8] Das, R.U., Rishi, M., Dubey, J.D., “Asean plus six and successful FTAS: Can India propel intra-industry trade flows?”, The Journal of Developing Areas, 50 (2016) 2.[9] Hayakawa, K., “Impact of diagonal accumulation rule on FTA utilization: Evidence from bilateral and multilateral FTAs between Japan and Thailand”, J. Japanese Int. Economies, 32 (2014), 1-16.[10] Jennifer Y. Leung, “Bilateral vertical specialization between the U.S. and its trade partners - before and after the free trade agreements”, International Review of Economics and Finance, 45 (2016), 177-196.[11] Jongwanich, J., & Kohpaiboon, A., “Exporter responses to FTA tariff preferences: evidence from Thailand”, Asian Pacific Economic Literature (2017).[12] Lakatos, C., & Walmsley, T., “Investment creation and diversion effects of the ASEAN-China free trade agreement”, Economic Modelling, 29 (2012), 766-779.[13] Vanhnalat, B. at el., “Assessment the Effect of Free Trade Agreements on Exports of Lao PDR”, International Journal of Economics and Financial Issues, 5 (2015) 2, 365-376.[14] Vietnam Chamber of Commerce and Industry (VCCI), “Freedom of international trade in Vietnam”, Research report, Vietnam, 2015.

scholarly journals Implementing the African Continental Free Trade Area (AfCFTA): The Effects of Trade Procedures on Trade Flows

2021 ◽  
Vol 13 (1) ◽  
pp. 15
Author(s):  
Manfred Kouty
Keyword(s):  
Gravity Model ◽  
Free Trade ◽  
Free Trade Area ◽  
Trade Flows ◽  
African Union ◽  
African Countries ◽  
Trade Area ◽  
The Impact

In January 2018, the 10th African Union (AU) Summit of African Heads of States and Governments was held in Kigali. At this occasion, 44 countries had signed the African Continental Free Trade Area (AfCFTA) agreement. In this study, it is pointed out that the implementation of AfCFTA cannot be done without harmonized trade procedures. Using a gravity model of 49 African countries over the 2010-2015 periods, the study estimates the impact of inefficient trade procedures on intra-African trade. The results show that trade procedures such as the number of documents required to import goods and Border compliance negatively affect intra-African trade. This suggests the need of harmonization and rationalization of trade procedures to boost intra-African trade.

scholarly journals DETERMINANTS OF THE BILATERAL TRADE FLOWS OF NORTH MACEDONIA– A GRAVITY MODEL APPROACH

2021 ◽  
Vol 6 (1) ◽  
pp. 98-107
Author(s):  
Irena Kikerkova ◽  
◽  
Elena Makrevska Disoska ◽  
Katerina Toshevska-Trpchevska ◽  
Jasna Tonovska
Keyword(s):  
Gravity Model ◽  
Bilateral Trade ◽  
Trade Flows ◽  
Gdp Per Capita ◽  
Candidate Country ◽  
Bilateral Trade Flows ◽  
Per Capita ◽  
The Impact ◽  
Trade Partners ◽  
The Eu

The paper makes an indetail overview of the structure of the trade exchange of goods of Macedonia and explores the determinants of its bilateral trade flows using the gravity model. The analysis includes data on 40 trade partners of Macedonia in the period from 2005-2019. The used variables in the model are: GDP per capita difference, population, distance and relative endowments of factors of production (capital, land and labour). In most of the analyzed regressions the coefficients on determinants such as GDP per capita difference and population are positive and their impact upon the bilateral trade (as dependent variable) is statistically significant. Intensity of Macedonian trade decreases in regard of the distance from a trade partner and increases in partner’s size – the country tends to trade more with lager countries. In our analysis we included three dummy variables such as: membership in the EU and in CEFTA-2006 and common language. The impact of the possible membership in the EU is clearly positive and statistically significant. Being a candidate country for full EU membership, Macedonia trades more with EU trade partners rather than with the neibouring countries, members of CEFTA-2006. Keywords: bilateral trade, gravity model, trade partners, Republic of North Macedonia, European Union, CEFTA-2006

scholarly journals Estimating the Impact of EU Membership on United Kingdom’s Export by Using Gravity Model

2021 ◽  
Vol 1 (1) ◽  
pp. 7-16
Keyword(s):  
Gravity Model ◽  
Free Trade ◽  
Regional Integration ◽  
Free Trade Agreements ◽  
Trade Agreement ◽  
Eu Membership ◽  
Trading Partners ◽  
Time Periods ◽  
The Impact ◽  
The Eu

After a year from the formal UK withdrawal from the EU, there are still different opinions about the potential economic impact of Brexit. This paper gives a detailed overview of the trade profile of UK and explores the determinants of United Kingdom`s export. We apply the gravity model to estimate the aggregate benefits of EU membership or the reversed, lost (foregone) benefits from leaving the EU. We measure the influence of GDP, distance, population, the EU membership, and signed free trade agreement with the trading partners on UK’s export as a dependent variable. The analysis includes data for 70 UK trading partners in a period of 48 years (from 1973 to 2020) since Great Britain become EU member. The results show that UK’s export is directly proportional to trade partner’s GDP and inversely proportional to distance. In order to estimate the average benefit due to EU membership, we estimated subsequent equations with different time periods. The coefficient decreases and becomes negative as we shorten the time periods, proving that the average trade advantage due to EU membership diminishes over time. According to the economic theory of regional integration, it is expected that the coefficient increases due to many rounds of enlargement, especially the biggest one in 2004 as well as due to the introduction of the Euro. On the contrary, as we shorten the time periods in the analysis, we obtained increasing coefficient for the variable free trade agreements. This confirms that trade exchange within FTA has significantly higher effect on United Kingdom’s export in comparison with trade within EU.

Assessing the Impact of the Australia-United States Free Trade Agreement (AUSFTA) on Australian and Global Medicines Policy

2005 ◽  
Author(s):  
Thomas Alured Faunce ◽  
Evan Doran ◽  
David Henry ◽  
Peter Drahos ◽  
Andrew Searles ◽  
...  
Keyword(s):  
United States ◽  
Free Trade ◽  
Free Trade Agreement ◽  
Trade Agreement ◽  
The Impact

Free Trade Agreement between Tunisia and the European Union, Do Institutions Matter?: An Empirical Validation by A Gravity Model

2015 ◽  
Vol 5 (2) ◽  
pp. 19-36
Author(s):  
Anis Kacem
Keyword(s):  
European Union ◽  
International Trade ◽  
Gravity Model ◽  
Free Trade ◽  
Spatial Econometrics ◽  
Free Trade Agreement ◽  
Trade Agreement ◽  
The European Union ◽  
Institutional Dimension ◽  
North And South

Tunisia has signed a free trade agreement with the European Union in 1996, which provides for the reduction of tariff barriers between Tunisia and the EU. In this article, we aim to know and test whether the similarity of the institutional framework has to stimulate international trade between Tunisia and the European Union. In this context, we built a variable called “Institutional distance” to valid the institutional dimension of international trade, near borders effects reported in the literature. To this end, a gravity model was used initially (Tunisia and 21 European countries). Secondly, the estimate shows the existence of spatial autocorrelation. The latter has been corrected using spatial econometrics. The results show that the geographical distance remains more important than the institutions in this type of agreement between north and south shores of the Mediterranean.

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