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Composition of Trade between Australia and Latin America: Gravity Model

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    Abstract

    This paper aims to analyse the value of merchandise through a broad category of trade between Australia and nine selected Latin American countries by using a gravity model focusing on the period from 1998 to 2004. The traditional cross-sectional data is a useful tool to understand this bilateral trade focusing on exports and imports through primary products, manufactured products, and total merchandise trade. The general thrust of the analysis regarding trade composition implies that Australian trade with Latin America has been shaped by political and economic variables. The trade of primary products is explained by economic distance, openness, population, and political influence. Economic mass along with economic distance are significant explanatory variables in the trade of manufactured products. Political influence on bilateral trade has been significant in most Latin American countries – captured by a dummy for presidential changes – exceptions are: Argentina, Chile, and Uruguay.

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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow040601.pdf
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    Bibliographic Info

    Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp07-19.

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    Length: 32 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:uow:depec1:wp07-19

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    Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
    Phone: +612 4221-3659
    Fax: +612 4221-3725
    Web page: http://business.uow.edu.au/econ/index.html
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    Keywords: trade; gravity model; Latin America; Australia; cross-sectional data.;

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    1. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D., 2003. "Augmented gravity model: An empirical application to Mercosur- European trade flows," International Trade 0309019, EconWPA.
    2. Céline CARRERE & Maurice SCHIFF, 2004. "On the Geography of Trade: Distance is Alive and Well," Working Papers 200423, CERDI.
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    7. Carlos Carrillo & Carmen A. Li, 2002. "Trade Blocks and the Gravity Model: Evidence from Latin American Countries," Economics Discussion Papers 542, University of Essex, Department of Economics.
    8. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
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    11. Diego Agudelo & Galia Julieta Benitez & Larry Davidson, 2006. "A South American Perspective: Regional versus Global Trade Patterns," Working Papers 2006-16, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    12. Geraci, Vincent J & Prewo, Wilfried, 1977. "Bilateral Trade Flows and Transport Costs," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 67-74, February.
    13. Thursby, Jerry G & Thursby, Marie C, 1987. "Bilateral Trade Flows, the Linder Hypothesis, and Exchange Risk," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 488-95, August.
    14. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
    15. Bryn Battersby & Robert Ewing, 2005. "International Trade Performance: The Gravity of Australia's Remoteness," Treasury Working Papers 2005-03, Treasury, Australian Government, revised Jun 2005.
    16. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann, 2003. "Augmented Gravity Model: An Empirical Application to Mercosur-European Union Trade Flows," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 291-316, November.
    17. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
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