Preliminary communication

https://doi.org/10.17559/TV-20200217101315

Applying Gravity Model to Analyse Trade Direction

Vladimir Ristanović* orcid.org/0000-0002-2957-3465 ; Faculty of Business Economics and Entrepreneurship, University of Belgrade, Mitropolita Petra 8, 11000 Belgrade, Serbia
Dinko Primorac ; Department of Economy, University North, Jurja Križanića 31b, 42000 Varaždin, Croatia
Goran Kozina ; Department of Economy, University North, Jurja Križanića 31b, 42000 Varaždin, Croatia

Abstract

The application of Newton's law of gravity in explaining international trade proved to be very successful. The popularity of a gravity model for explaining trade flows has been due to the fact that the calculations require affordable data for every economy. The basic elements of the panel gravity model are mainly GDP, population and distance. This paper analyses Serbia's trade from 2001 to 2018 based on the experience of neighbouring countries of Croatia and Romania, using STATA software. The trade exchange with more distanced EU members is less realized. The country tends to trade much more with its neighbouring EU members, proving the basic assumption of a gravity model. There are exceptions regarding some parts of the trade with developed EU economies, regardless of their distance. These relations will help us to evaluate the trade pattern and direction of Serbian trade in the EU accession process using a gravity model.

Keywords

European Union; panel gravity model; trade

Hrčak ID:

244862

URI

https://hrcak.srce.hr/244862

Publication date:

17.10.2020.

Visits: 2.262 *