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An Analysis of Cambodia’s Trade Flows: A Gravity Model

  • Kim, Sokchea

This paper aims at investigating the important factors affecting Cambodia’s trade flows to major 20 trading countries from 1994 to 2004. The analysis employs a gravity model with some modifications. Assuming that other factors are constant, the results indicate that the trade flows significantly depend on the economic sizes of both the exporting and importing countries and Cambodia appears to trade more with neighboring countries. In addition, the tests also detect the significant negative impact of exchange rate volatility on the trade flows as well as aggregate exports; however, there is little evidence that the depreciation of Cambodia’s currency, the riel, affects its exports. Nonetheless, the tests using sub-period samples suggest that the positive impacts of bilateral exchange rate depreciation are found significant in sub-period I (1994-1998), but not in sub-period II (1999-2004). Finally, the paper also shows consistent findings that ASEAN membership play little role in boosting trade flows in the region; however, the results in sub-period II suggest that ASEAN membership helps improve border trade which suffered from Asian financial crisis.

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File URL: http://mpra.ub.uni-muenchen.de/21461/1/MPRA_paper_21461.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21461.

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Date of creation: 28 Aug 2006
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Handle: RePEc:pra:mprapa:21461
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  1. Simon J. Evenett & Wolfgang Keller, 1998. "On Theories Explaining the Success of the Gravity Equation," NBER Working Papers 6529, National Bureau of Economic Research, Inc.
  2. Giovanni Dell'Ariccia, 1998. "Exchange Rate Fluctuations and Trade Flows; Evidence From the European Union," IMF Working Papers 98/107, International Monetary Fund.
  3. repec:ebl:ecbull:v:6:y:2004:i:4:p:1-8 is not listed on IDEAS
  4. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  5. International Monetary Fund, 2004. "Cambodia; Ex Post Assessment of Longer-Term Program Engagement," IMF Staff Country Reports 04/324, International Monetary Fund.
  6. Jeffrey A. Frankel & Shang-Jin Wei, 1994. "Yen Bloc or Dollar Bloc? Exchange Rate Policies of the East Asian Economies," NBER Chapters, in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, NBER-EASE Volume 3, pages 295-333 National Bureau of Economic Research, Inc.
  7. SaangJoon Baak, 2004. "Exchange Rate Volatility and Trade among the Asia Pacific Countries," Econometric Society 2004 Far Eastern Meetings 724, Econometric Society.
  8. Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
  9. SaangJoon Baak & Arif Al-Mahmood & Souksavanh Vixathep, 2003. "Exchange Rate Volatility and Exports from East Asian Countries to Japan and the U. S," Working Papers EMS_2003_01, Research Institute, International University of Japan.
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