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An Analysis of Cambodia’s Trade Flows: A Gravity Model

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  • Kim, Sokchea

Abstract

This paper aims at investigating the important factors affecting Cambodia’s trade flows to major 20 trading countries from 1994 to 2004. The analysis employs a gravity model with some modifications. Assuming that other factors are constant, the results indicate that the trade flows significantly depend on the economic sizes of both the exporting and importing countries and Cambodia appears to trade more with neighboring countries. In addition, the tests also detect the significant negative impact of exchange rate volatility on the trade flows as well as aggregate exports; however, there is little evidence that the depreciation of Cambodia’s currency, the riel, affects its exports. Nonetheless, the tests using sub-period samples suggest that the positive impacts of bilateral exchange rate depreciation are found significant in sub-period I (1994-1998), but not in sub-period II (1999-2004). Finally, the paper also shows consistent findings that ASEAN membership play little role in boosting trade flows in the region; however, the results in sub-period II suggest that ASEAN membership helps improve border trade which suffered from Asian financial crisis.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21461.

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Date of creation: 28 Aug 2006
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Handle: RePEc:pra:mprapa:21461

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Related research

Keywords: Trade flows; gravity model; exchange rate volatility; aggregate exports; bilateral exchange rate depreciation; ASEAN; Asian financial crisis;

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References

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  1. repec:ebl:ecbull:v:6:y:2004:i:4:p:1-8 is not listed on IDEAS
  2. Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
  3. SaangJoon Baak & Arif Al-Mahmood & Souksavanh Vixathep, 2003. "Exchange Rate Volatility and Exports from East Asian Countries to Japan and the U. S," Working Papers, Research Institute, International University of Japan EMS_2003_01, Research Institute, International University of Japan.
  4. Giovanni Dell'Ariccia, 1999. "Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 5.
  5. SaangJoon Baak, 2004. "Exchange Rate Volatility and Trade among the Asia Pacific Countries," Econometric Society 2004 Far Eastern Meetings, Econometric Society 724, Econometric Society.
  6. Jeffrey A. Frankel & Shang-Jin Wei, 1992. "Yen bloc or dollar bloc: exchange rate policies of the East Asian economies," Pacific Basin Working Paper Series, Federal Reserve Bank of San Francisco 93-01, Federal Reserve Bank of San Francisco.
  7. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(2), pages 281-316, April.
  8. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, American Economic Association, vol. 69(1), pages 106-16, March.
  9. International Monetary Fund, 2004. "Cambodia," IMF Staff Country Reports 04/324, International Monetary Fund.
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