Using gravity model to analyze romanian trade flows between 2001 and 2015

Abstract

The main aim of the paper is to analyse the factors which influence the dimension, dispersion and the level of efficiency of Romania's trade flows in the 2001-2015 period. We have conducted a statistical analysis using EViews, which employed the Panel Least Squared method and the Estimated Generalized Least Squared method. We also provided a critical review of the literature covering the gravity model. Some of the questions we touch upon in this paper are: The variables for similarity as predictors of trade flows, the matrix which synthesizes the differences between potential and actual trade flows and the magnitude of convergence at trade flow level. We focused our discussion on the trade flows between Romania and specific countries for a period which stretches for fifteen years. Our primary scientific goal was to provide an overview of Romanian's recent trade flows and to propose some new predictors for the international flows of goods and services. We want to point out that the conclusions which stem from our empirical study are contingent on the relatively short period we examined and that future research may be considered extending the reference period in order to refine the results of the gravity model further.