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Dynamics of Malawi’s trade flows: a gravity model approach

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  • Simwaka, Kisu

Abstract

The paper attempts to examine Malawi’s trade with her major trading partners using an econometric gravity model. In the model, the bilateral trade is a linear function of economic size of the country, geographical distance, and exchange rate volatility, among other factors. Preliminary results show that the fixed effects model is favourable over the random effects gravity model. Specifically, Malawi’s bilateral trade is positively determined by the size of the economies (GDP of the importing country) and similar membership to regional integration agreement. On the other hand, transportation cost, proxied by distance, is found to have a negative influence on Malawi’s trade. Likewise, exchange rate volatility depresses Malawi’s bilateral trade whereas regional economic groupings have had insignificant effect on the flow of bilateral trade. The implications of these results are many. First, all kinds of barriers to trade must be liberalized to a greater extent to enhance Malawi’s trade. One of the main problems of bilateral trade in Africa is transport infrastructure network. Improvement in infrastructure may be a necessary step for successful trade flows within Africa. Second, Malawi can do better if the country trades more with its neighbours. Third, greater stability in the international exchange system would help increase prospects for trade and investments for Southern African countries. Finally, the flow of trade in regional blocks is constrained by problems of compensation issues, overlapping membership, policy harmonization and poor private sector participation.

Suggested Citation

  • Simwaka, Kisu, 2006. "Dynamics of Malawi’s trade flows: a gravity model approach," MPRA Paper 1122, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1122
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    File URL: https://mpra.ub.uni-muenchen.de/1122/1/MPRA_paper_1122.pdf
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    References listed on IDEAS

    as
    1. Alemayehu Geda & Haile Kebret, 2008. "Regional Economic Integration in Africa: A Review of Problems and Prospects with a Case Study of COMESA," Journal of African Economies, Centre for the Study of African Economies, vol. 17(3), pages 357-394, June.
    2. Filippini, Carlo & Molini, Vasco, 2003. "The determinants of East Asian trade flows: a gravity equation approach," Journal of Asian Economics, Elsevier, vol. 14(5), pages 695-711, October.
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    Cited by:

    1. Karagoz Kadir, 2014. "Determinants Of Tourist Inflows To Romania: Evidence From Augmented Panel Gravity Model," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 347-358, July.
    2. Degirmenci N. & Yakıcı Ayan T., 2019. "Gravity Approach for Determinants of Exports," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 102-111.
    3. Alfred Moyo, 2019. "Evaluating the impact of global oil prices on the SADC and the potential for increased trade in biofuels and natural gas within the region," WIDER Working Paper Series wp-2019-36, World Institute for Development Economic Research (UNU-WIDER).
    4. Nu, Nu Lwin, 2009. "Analysis on International Trade of CLM Countries," IDE Discussion Papers 215, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Moses H. Lubinga & Barnabas Kiiza, 2013. "Exchange Rate Uncertainty and Bilateral Trade Flows: Insights from Uganda," Business and Economic Research, Macrothink Institute, vol. 3(1), pages 227-239, June.
    6. Pathairat Pastpipatkul & Petchaluck Boonyakunakorn & Kanyaphon Phetsakda, 2020. "The Impact of Thailand’s Openness on Bilateral Trade between Thailand and Japan: Copula-Based Markov Switching Seemingly Unrelated Regression Model," Economies, MDPI, vol. 8(1), pages 1-13, January.
    7. Cardoso, B.F. & Rasetti, M. & Giampietri,E. & Finco, A. & Shikida, P.F.A., 2017. "Trade Dynamics in the Italian Floriculture Sector within EU Borders: A Gravity Model Analysis," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 9(2), June.
    8. Mohammad ALAWIN & Ziad ABU-LILA, 2016. "Uncertainty and Gravity Model for International Tourism Demand in Jordan: Evidence from Panel-GARCH Model," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 16(1).
    9. Irwan Shah Zainal Abidin & Muhammad Haseeb & Rabiul Islam, 2016. "Regional Integration of the Association of Southeast Asian Nations Economic Community: An Analysis of Malaysia - Association of Southeast Asian Nations Exports," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 646-652.

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    More about this item

    Keywords

    Malawi’s trade dynamics; gravity model; panel data; fixed effects model;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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