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New Findings on Actual and Potential Trade between Romania and the Russian Federation: A Gravity Approach

Author

Listed:
  • Dascalescu, Virgil

    () (National Bank of Romania, Bucharest, Romania)

  • Nicolae, Elena

    () (Bucharest University of Economics Romania)

  • Ion, Irina

    () (Bucharest University of Economics, Romania)

Abstract

The paper attempts to verify the hypothesis that Romanian exports to the Russian Federation are below their potential. We first looked at statistical data regarding bilateral trade, custom duties and foreign direct investment; the resulting conclusions support our hypothesis. Further, we use a gravity equation, in order to forecast Romanian exports to a number of 43 countries, accounting for a sizeable share of total exports, covering a world-wide area using data series over a period of time between 1993 and 2008. Based on the gravity equation, we calculated export potential of Romania to the Russian Federation, being interested in the long run trade dynamics potential. We made the comparison between potential and real trade for the year 2008, being in fact interested in what export would have been in 2008 if during all the period studied (1993-2007) trade would have followed the gravity patterns. We conclude that if the Romanian exports to the Russian Federation would have perfectly fitted the general “gravity pattern”, the level of exports to the country would stand at 2,317 current billion dollars, which is 2.58 times higher than the registered level. From an economic point of view, these results can be interpreted, in the context of our broader analysis, as a good indicator that the opportunities in the Russian Federation market are still undervaluated by Romanian exporters and the rest of stakeholders in the exportation process.

Suggested Citation

  • Dascalescu, Virgil & Nicolae, Elena & Ion, Irina, 2010. "New Findings on Actual and Potential Trade between Romania and the Russian Federation: A Gravity Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 102-124, December.
  • Handle: RePEc:rjr:romjef:v::y:2010:i:4:p:102-124
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    References listed on IDEAS

    as
    1. Juan Ruiz & Josep M. Vilarrubia, 2007. "The wise use of dummies in gravity models: export potentials in the Euromed region," Working Papers 0720, Banco de España;Working Papers Homepage.
    2. Gros, Daniel & Gonciarz, Andrzej, 1996. "A note on the trade potential of Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 12(4), pages 709-721, December.
    3. Rosefielde,Steven, 2005. "Russia in the 21st Century," Cambridge Books, Cambridge University Press, number 9780521545297, April.
    4. Rosefielde,Steven, 2005. "Russia in the 21st Century," Cambridge Books, Cambridge University Press, number 9780521836784, April.
    5. Edward Christie, 2001. "Potential Trade in Southeast Europe: A Gravity Model Approach," wiiw Balkan Observatory Working Papers 11, The Vienna Institute for International Economic Studies, wiiw.
    6. Vladimir Kontorovich, 2005. "Russia in the 21st Century: The Prodigal Superpower," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 47(4), pages 707-709, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Romanian exports; potential exports; the Russian Federation; gravity model; trade development;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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