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A comparative analysis of the determinants of South African bilateral trade flows with the European Union-Southern African Development Community economic partnership agreement and trade development and cooperation agreement

Author

Listed:
  • Simbarashe Mhaka

    (Department of Economics, Nelson Mandela University)

  • Leward Jeke

    (Department of Economics, Nelson Mandela University)

Abstract

This paper presents the impact of economic size, market size and exchange rate on South Africa’s trade flows with the European Union under the Trade Development and Cooperation Agreement (TDCA). The paper also examines the effects of economic size, market size and exchange rate on South African trade flows with members of the Southern African Customs Union and of the European Union in what is called the European Union-Southern African Development Community Economic Partnership Agreement (EU-SADC EPA. The study exploits panel data on international trade of South Africa over the period 2000-’16. The empirical analysis relies on a panel data econometrics framework as an estimation technique for the gravity model of trade. In the panel data approach, the pooled OLS, fixed effects and random effects models are used for estimation. The results indicate a positive relationship between South Africa’s economic/market size and South Africa’s trade flows in the TDCA. In the EU-SADC EPA, the results show a positive relationship between economic size and market size with South Africa’s trade flows in the EU-SADC EPA. However, in the TDCA, the exchange rate and the trading partner’s market size have a negative outcome on South Africa trade flows. A negative relationship is shown between the exchange rate and South Africa’s trade flows in the EU-SADC EPA. The results also show that it is better for South Africa to trade in the EU-SADC EPA than to remain in the TDCA. The paper recommends that policy-makers select trading partners based on the sizes of their markets and economies.

Suggested Citation

  • Simbarashe Mhaka & Leward Jeke, 2018. "A comparative analysis of the determinants of South African bilateral trade flows with the European Union-Southern African Development Community economic partnership agreement and trade development an," Working Papers 1836, Department of Economics, Nelson Mandela University, revised Dec 2018.
    • Handle: RePEc:mnd:wpaper:1836
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    References listed on IDEAS

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    More about this item

    Keywords

    trade flows; economic size; market size; exchange rate; gravity model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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