Analysis of Russia’s Bilateral Trade and Economic Cooperation with SCO country Members: Gravity Model Approach

SCO (Shanghai Cooperation Organization) plays an important role in the economic spheres of influence in Central Asia, and also serves as an effective instrument of regional economic integration. International trade integration takes significant place in the international economic, through which overcomes the limitations of resources and the narrowness of the domestic regional and national markets, creates opportunity for mass production, increase savings, economic growth, more rational use of natural resources and labor. Modern science has developed a number of models of international trade. Among empirical models that analyze the determinants of interaction include the gravity model. This paper attempts to investigate trade potential for Russia using the gravity models and cross section data of SCO country members. The estimated coefficients from the gravity models are then used to predict Russian’s trade potential. Theoretical justification for using the gravity model to analyse bilateral trade flows. The basic idea behind the gravity model approach is that the volume of exports of one country to another is directly proportional to the economic size of these countries due to the fact that their size determines, respectively, the supply and demand for exports, and inversely proportional to the distance between these countries, as the cost of trade in goods increasing with the distance between the partners.