Augmented Gravity Model: An Empirical Application to Mercosur-European Union Trade Flows

Inmaculada Martínez-Zarzoso () and Felicitas Nowak-Lehmann
Additional contact information
Inmaculada Martínez-Zarzoso: University Jaime I, http://www.eco.uji.es/
Felicitas Nowak-Lehmann: University of Göettingen
Authors registered in the RePEc Author Service: Inmaculada Martínez-Zarzoso

Journal of Applied Economics, 2003, vol. 6, 291-316

Abstract: This paper applies the gravity trade model to assess Mercosur-European Union trade, and trade potential following the agreements reached recently between both trade blocs. The : model is tested for a sample of 20 countries, the four formal members of Mercosur plus : Chile and the fifteen members of the European Union. A panel data analysis is used to : disentangle the time invariant country-specific effects and to capture the relationships : between the relevant variables over time. We find that the fixed effect model is to be : preferred to the random effects gravity model. Furthermore, a number of variables, namely, : infrastructure, income differences and exchange rates added to the standard gravity equation, : are found to be important determinants of bilateral trade flows. :

Keywords: gravity equation; panel data; infrastructure; integration (search for similar items in EconPapers)
JEL-codes: F14 F15 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (112)

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Journal Article: Augmented Gravity Model: An Empirical Application to Mercosur-European Union Trade Flows (2003)
Journal Article: Augmented Gravity Model: An Empirical Application to Mercosur-European Union Trade Flows (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:6:y:2003:n:2:p:291-316

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