The paper revisits the popular gravity model of trade in the light of the increasingly acknowledged findings of spatial econometrics and interprets the results in view of some recent theoretical developments from the economic literature that contribute to its foundation. When the inherent spatial effects are explicitly taken into account, the magnitude of the estimated parameters changes considerably and, with it, the measures on the predicted trade flows. This result is illustrated on the case of predicted trade flows between the EU and some of its potential members.
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Paper provided by University of Exeter, School of Business and Economics in its series Discussion Papers with number
00/04.
Length: 24 pages Date of creation: 2000 Date of revision: Handle: RePEc:fth:exetec:00/04
Contact details of provider: Postal: School of Business and Economics University of Exeter Streatham Court Rennes Drive Exeter EX4 4PU Phone: (01392) 263218 Fax: (01392) 263242 Web page: http://www.exeter.ac.uk/sobe/ More information through EDIRC
Find related papers by JEL classification: F17 - International Economics - - Trade - - - Trade Forecasting and Simulation R15 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
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