Gravity Model

The recent global crisis, as a big crash ( Baldwin and Simon , 2009), has reduced foreign demand growth affecting total countries€™ exports. Given the importance of foreign trade to nations and the reality that recent crisis has affected international trade we study the effects of the global financial crisis on trade relations between countries by using Ma and Cheng (2003) approach and by applying gravity model to both selected developed and developing countries during 1998-2010. Emprical results have approved negative effects of financial crisis on international trade in the countries under consideration. The result obtained is evident that such incidence seems to be significant to explain a sharp fall in the world exports.  JEL Classification : G01, F10

In more recent years, it has become increasingly recognized that R&D (research and development) is a key driver of economic growth, a source of innovation and change, and as such stimulates improvements in productivity and economic competitiveness. It is closely associated with knowledge and flexibility, two factors that have gained new significance as a source of competitiveness in an increasingly globalized world economy. In this paper the relationship between bilateral trade and R&D differences among selected east and west Asian countries is investigated, specifying a semi-parametric gravity model over 1990-2013. Despite the majority of empirical analysis, we explore the relationship between trade and R&D differences through a nonparametric analysis. The results confirm that there is a nonparametric relationship between bilateral exports and R&D differences for both. The implication is that countries with various levels of R&D activities, namely arising from entrepreneurial activities, can affect widely and substantially international trade flows.

In economic theory, various determinants are considered to explore their effects on trade patterns. Accordingly, business cycles indicate turbulences in economic activities. Business cycles and their fluctuations cause a change in demand for goods and services from the other country then it can affect trade flows. In this study, by using a gravity model, we study the effects of business cycles on bilateral trade flows within Eurozone countries. In this regard, the challenge is that the countries in the region may be faced whit changes in their trade relation in directions whether parametric or non-parametric manners. To be evident, we have used we have used data from six Eurozone countries, namely Germany, France, Italy, Spain, Portugal and Greece for the period of 1995-2013, and then estimate the model with a semi-parametric panel data approach. The empirical results have shown that business cycles explain trade relations non-parametrically in the region. The results imply a transparent unique exchange policy toward their mutual trade flows to avoid outliers in their economic relations. JEL Classification: C14, F10, E32.  

Foreign trade expansion plays an important role in economic growth and development. Since Iran’s single-product economy is facing tight sanctions, among trading partners, Turkey benefits from special place, and political independence in international relations because of its large population, rising per capita income, high economic growth rate, geographical and cultural proximity to Iran. Many opportunities and substantial capacities have been established for expanding foreign trade between these two countries. To do this, it is necessary to determine the maximum export capacity of Iran to Turkey and whether this capacity has actually been deployed and realized or not. The next question is what the bases of Iran’s export development to Turkey are, and the goods which should be focused on to develop trading. Therefore, the aim of this study was to estimate the maximum export capacity of Iran to Turkey and to determine the commodities with the highest export capacity. The Revealed Comparative Advantage (RCA) index, the Cosine Index, and the General Model of the gravity model were used to evaluate Iran’s export potential and to determine commodities in which Iran has export advantage. Iran’s export potential to Turkey was investigated in various years and in different commodity groups by comparing the rate of export volume of each commodity to total volume of its import by Turkey. Research findings indicated that the highest Iranian export potential value to Turkey was $9,339 million, and just 7.2% of that ($669 million) has been realized. Also, 11 commodity groups formed more than 66% of Iranian potential exports to Turkey. Among them, ‘mineral products’ with $2,730 million, ‘plastics and natural rubber and artifacts made from them’ with 1,185 million, ‘common metals and artifacts made from them’ with $918 million, and ‘products of the chemical industry and its related industries’ with $879 million were respectively the four commodity groups with the highest export potential. JEL Classification: F14]

Iran and Afghanistan share deep historical, cultural and civilizational ties. Iran is one of Afghanistan’s largest trading partners. However, economic sanctions have disrupted bilateral trade between these two neighboring countries through various channels. This paper presents an empirical analysis of the impact of economic sanctions on trade between Iran and Afghanistan in the period 2004-2018 by applying the Gravity Model, while the estimation is performed using fully modified least-squares technique. Findings of the research indicate that the imposition of any strong economic sanctions, in the long run, not only during the sanctions period but also in the post-sanctions period, has increased trade between Iran and Afghanistan. On the other hand, weak sanctions during the sanctions period have reduced trade; nevertheless, weak sanctions in the post-sanctions period have increased bilateral trade. Development of trade cooperation between the two countries, facilitation of trade affairs and expansion of joint regional and international cooperation should be on the agenda of economic policymakers in Iran and Afghanistan.