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The new version of gravity model in explaining bilateral trade. “A comparative study for developed and developing nations”

Author

Listed:
  • Subhani, Muhammad Imtiaz
  • Osman, Ms. Amber
  • Khokhar, Rabia

Abstract

World trade has grown rapidly. Several factors are highlighted by literature as the driving forces behind the growth of world trade. Reductions in barriers to trade are one of them. A comprehensive empirical investigation is carried to ascertain the trade reducing and increasing effect of barriers to trade and facilitators to trade. The new version of gravity model is developed in the connections in this study while analyzing the effect of GDP, distance, remittances, FDI, transportation cost, exchange rate, inflation, population, import and export of specifically trading partners on trade flows during bilateral trade. The study revealed that the developed version of gravity model explains the trade flows substantially and vigorously for the nations from developed world than for the nations from developing world.

Suggested Citation

  • Subhani, Muhammad Imtiaz & Osman, Ms. Amber & Khokhar, Rabia, 2011. "The new version of gravity model in explaining bilateral trade. “A comparative study for developed and developing nations”," MPRA Paper 34727, University Library of Munich, Germany, revised 2011.
    • Handle: RePEc:pra:mprapa:34727
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    More about this item

    Keywords

    Gravity model; Export; Import; Trade barriers; Trade facilitators;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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