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Extended Gravity Panel Data Model of Polish Foreign Trade

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  • Tomasz Brodzicki

    ()
    (Faculty of Economics, University of Gdansk)

Abstract

The goal of this article is to investigate the determinants of the pattern of bilateral trade flows of Poland with its major trade partners with the use of trade gravity model approach. The analysis is carried out for 181 trade partners of Poland in the period 1999-2006. In the basic version of the trade gravity model we take into account only the standard factors as suggested by the literature of the subject. In its extended version we control for several additional factors including: quality of institutions, impact of regional and bilateral trade agreements or exchange rate volatility. In order to obtain unbiased results we utilize the Prais-Winsten regression with Panel Corrected Standard Errors (PCSE). In most of the cases the coefficients for the traditional gravity determinants are economically sensible and their impact on the dependant variable is statistically significant. The impact of market size, distance or quality of institutions are in line with our expectations. The role of migrants as proxied by the size of Polish diaspora is rather large. Increase in the size of Polish diaspora of 1 per cent increases bilateral trade by approx. 0.2 per cent. Foreign exchange rate volatility has an adversely negative impact on the trade flows. The unrealized potential of a membership in the eurozone could be judged relatively high. The results concerning trade agreements are however rather unanticipated.

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File URL: http://gnu.univ.gda.pl/~keie/aio14.pdf
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Bibliographic Info

Paper provided by Economics of European Integration Department, Faculty of Economics, University of Gdansk, Poland in its series Working Papers with number 0901.

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Length: 19 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:gda:wpaper:0901

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Keywords: trade gravity model; Poland; panel data; PCES;

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References

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  1. Peter Egger, . "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO.
  2. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  3. Aitken, Norman D, 1973. "The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis," American Economic Review, American Economic Association, vol. 63(5), pages 881-92, December.
  4. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  5. Henri L. F. de Groot & Gert-Jan Linders & Piet Rietveld & Uma Subramanian, 2004. "The Institutional Determinants of Bilateral Trade Patterns," Kyklos, Wiley Blackwell, vol. 57(1), pages 103-123, 02.
  6. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series rwp01-013, Harvard University, John F. Kennedy School of Government.
  7. Peter Egger, 2005. "Alternative Techniques for Estimation of Cross-Section Gravity Models," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 881-891, November.
  8. Carrere, Celine, 2006. "Revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model," European Economic Review, Elsevier, vol. 50(2), pages 223-247, February.
  9. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  10. Helena Marques, 2008. "Asymmetries in Heterogeneous Integrated Areas: Evidence from Intra-EU Sectoral Trade," Working Papers 2008.2, International Network for Economic Research - INFER.
  11. Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 449-461, October.
  12. Andrew K. Rose, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," NBER Working Papers 7432, National Bureau of Economic Research, Inc.
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Cited by:
  1. Tomasz Brodzicki, 2011. "Handel zagraniczny panstw Grupy Wyszehradzkiej. Zmiany strukturalne i rola handlu wewnatrzgaleziowego," Working Papers 1104, Economics of European Integration Department, Faculty of Economics, University of Gdansk, Poland.
  2. Tomasz Brodzicki, 2009. "Product variety and the export pattern of Poland 1999-2006," Working Papers 0903, Economics of European Integration Department, Faculty of Economics, University of Gdansk, Poland.
  3. Joanna Kuczewska & Maciej Krzeminski, 2011. "Regional constructed advantages – case of Pomeranian Region in Poland," Working Papers 1105, Economics of European Integration Department, Faculty of Economics, University of Gdansk, Poland.
  4. Deluna, Roperto Jr, 2013. "Trade Performance and Potential of the Philippines: An Application of Stochastic Frontier Gravity Model," MPRA Paper 51677, University Library of Munich, Germany.
  5. Deluna, Roperto Jr & Cruz, Edgardo, 2014. "Philippine Export Efficiency and Potential: An Application of Stochastic Frontier Gravity Model," MPRA Paper 53580, University Library of Munich, Germany.

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