The Factors Affecting Egypt’s Exports: Evidence from the Gravity Model Analysis
Affiliation(s)
1 Research School of Southeast Asian Studies, Xiamen University, Xiamen, China. 2 Department of Agricultural Economics, Faculty of Agriculture, Tanta University, Tanta, Egypt.
1 Research School of Southeast Asian Studies, Xiamen University, Xiamen, China. 2 Department of Agricultural Economics, Faculty of Agriculture, Tanta University, Tanta, Egypt.
ABSTRACT
This paper investigates the factors that affect Egypt’s bilateral export flows to its main trading partners. Based on the panel data, the gravity model approach has been used to estimate Egypt’s exports through annual data covering the period 2000 to 2013 for 42 main trading partners. The gravity model in its fixed effects panel data explained 84 percent of the fluctuations in Egypt’s exports. The results show that Egypt’s GDP, importer’s GDP, importer’s population, regional trade agreements (RTA) and the border between Egypt and its trading partner are the main factors affecting Egypt’s exports to its main trading partners. All these factors affect Egypt’s exports positively. Transportation costs (distance variable) are found to have negative but insignificant effect on Egypt’s exports. All these results can help the government and policy makers to undertake appropriate measures to improve the performance of the Egyptian foreign trade sector.
This paper investigates the factors that affect Egypt’s bilateral export flows to its main trading partners. Based on the panel data, the gravity model approach has been used to estimate Egypt’s exports through annual data covering the period 2000 to 2013 for 42 main trading partners. The gravity model in its fixed effects panel data explained 84 percent of the fluctuations in Egypt’s exports. The results show that Egypt’s GDP, importer’s GDP, importer’s population, regional trade agreements (RTA) and the border between Egypt and its trading partner are the main factors affecting Egypt’s exports to its main trading partners. All these factors affect Egypt’s exports positively. Transportation costs (distance variable) are found to have negative but insignificant effect on Egypt’s exports. All these results can help the government and policy makers to undertake appropriate measures to improve the performance of the Egyptian foreign trade sector.
Cite this paper
Elshehawy, M. , Shen, H. and Ahmed, R. (2014) The Factors Affecting Egypt’s Exports: Evidence from the Gravity Model Analysis. Open Journal of Social Sciences, 2, 138-148. doi: 10.4236/jss.2014.211020.
Elshehawy, M. , Shen, H. and Ahmed, R. (2014) The Factors Affecting Egypt’s Exports: Evidence from the Gravity Model Analysis. Open Journal of Social Sciences, 2, 138-148. doi: 10.4236/jss.2014.211020.
References
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[1] Shihab, R.A., Soufan, T. and Khaliq, S.A. (2014) The Causal Relationship between Exports and Economic Growth in Jordan. International Journal of Business and Social Science, 5, 302-308. [2] Rahman, M. (2009) Australia’s Global Trade Potential: Evidence from the Gravity Model Analysis. Working Paper, Oxford Business & Economics Conference, Oxford, 24-26 June 2009, 1-41. [3] Stait, F. (2005) Are Exports the Engine of Economic Growth? An Application of Cointegration and Causality Analysis for Egypt, 1977-2003. Working Paper, African Development Bank, No. 76. [4] Ijeoma, N.B. (2013) Trade Liberalization in Nigeria: An Examination of Impact and Policy Strategies. International Journal of Scientific & Engineering Research, 4, 1277-1283. [5] Linnemann, H. (1966) An Econometric Study of International Trade Flows. Holland Publishing, Amsterdam. [6] Papazoglou, C. (2009) Is Greece’s Export Performance Ally Low? Economic Bulletin, No. 32. [7] S?derling, L. (2005) Is the Middle East and North Africa Region Achieving Its Trade Potential? IMF Working Paper, No. 05/90. [8] Pradhan, S. (2006) India’s Export Potential to the Gulf Cooperation Council (GCC) Countries: A Gravity Model Analysis. Workshop Report, Asia-Pacific Research and Training Network on Trade, WTO/ESCAP. [9] Simwaka, K. (2007) Dynamics of Malawi’s Trade Flows: A Gravity Model Approach. Working Paper, Munich Personal RePEc Archive, No. 1122. [10] Rahman, M. (2010) Australia’s Global Trade Potential: Evidence from the Gravity Model Analysis. International Journal of Business Research, 10, 242-253. [11] Ozdeser, H. and Ertac, D. (2010) Turkey’s Trade Potential with Euro Zone Countries: A Gravity Study. European Journal of Scientific Research, 43, 15-23. [12] Rahman, M. and Ara, L. (2010) Bangladesh Trade Potential: A Dynamic Gravity Approach. Journal of International Trade Law and Policy, 9, 130-147. http://dx.doi.org/10.1108/14770021011054296 [13] Adekunle, B. and Gitau, C. (2011) Illusion or Reality: Understanding the Trade Flow between China and Sub-Saharan Africa. Working Paper, CSAE 25th Anniversary Conference: Economic Development in Africa, Tanzania, 1-27. [14] Gul, N. and Yasin, H. (2011) The Trade Potential of Pakistan: An Application of the Gravity Model. The Lahore Journal of Economics, 16, 23-62. [15] Crescimanno, M., Galati, A. and Yahiaoui, D. (2013) Determinants of Italian Agri-Food Exports in Non-EU Mediterranean Partner Countries: A Gravity Model Approach. New Medit Journal, 4, 46-54. [16] Koh, W. (2013) Brunei Darussalam’s Trade Potential and ASEAN Economic Integration: A Gravity Model Approach. Southeast Asian Journal of Economics, 1, 67-89. [17] Hatab, A., Romstad, E. and Huo, X.X. (2010) Determinants of Egyptian Agricultural Exports: A Gravity Model Approach. Modern Economy, 1, 134-143. http://dx.doi.org/10.4236/me.2010.13015 [18] Abutaleb, A., Taha, E., Hamad, M., Hamdy, M. and Salem, S. (2013) Determinants of Egypt-OIC Countries Trade Flows: System Dynamics Approach. Working Paper, 4th Think Tanks Forum of the OIC Countries, Cairo, 26-27 March 2013, 1-7. [19] El-Sayed, M.A. (2012) A Gravity Model Analysis of Egypt’s Trade and Some Economic Blocks. Working Paper, International Conference on Applied Life Sciences, Turkey, 10-12 September 2012, 343-350. [20] van Bergeijk, P.A.G., Brakman, S. and Ghosh, S. (2011) The Gravity Model in International Trade. Advances and Applications. Review of International Economics, 19, 979-981. http://dx.doi.org/10.1111/j.1467-9396.2011.01000.x [21] Blomqvist, H.C. (2004) Explaining Trade Flows of Singapore. Asian Economic Journal, 18, 25-43. http://dx.doi.org/10.1111/j.1467-8381.2004.00180.x [22] Tinbergen, J. (1962) Shaping the World Economy: Suggestions for an International Economic Policy. The Twentieth Century Fund, New York. [23] Poyhonen, P. (1963) A Tentative Model for the Volume of Trade between Countries. Weltwirtschaftliches Archive, 90, 93-100. [24] Deardorff, V. (1998) Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World? In: Frankel, J.A., Ed., The Regionalization of the World Economy, University of Chicago for the NBER, Chicago, 7-22. [25] Linneman, H. (1966) An Econometric Study of International Trade Flows. Dissertation, Netherlands School of Economics, Amsterdam. [26] Leamer, E.E. and Stern, R.M. (1970) Quantitative International Economics. Allyn and Bacon, Boston. [27] Anderson, J.E. (1979) A Theoretical Foundation for the Gravity Equation. The American Economic Review, 69, 106- 116. [28] Rahman, M. (2010) The Factors Affecting Bangladesh’s Exports: Evidence from the Gravity Model Analysis. Journal of Developing Areas, 44, 229-244. http://dx.doi.org/10.1353/jda.0.0075 [29] Cortes, M. (2007) Composition of Trade between Australia and Latin America: Gravity Model. Department of Economics, University of Wollongong, Wollongong, Working Paper 07-19. [30] Zarzoso, I.M. and Lehmann, F.N. (2003) Augmented Gravity Model: An Empirical Application to Mercosur-European Union Trade Flows. Journal of Applied Economics, 6, 291-316. [31] Rahman, M. (2003) A Panel Data Analysis of Bangladesh’s Trade: The Gravity Model Approach. 5th Annual Conference of the European Trade Study Group (ETSG2003), Madrid, 11-13 September 2003, 1-54. [32] Abidin, I.Z., Bakar, N. and Sahlan, R. (2013) The Determinants of Exports between Malaysia and the OIC Member Countries: A Gravity Model Approach. Procedia Economics and Finance, 5, 12-19. http://dx.doi.org/10.1016/S2212-5671(13)00004-X [33] (2014) World Integrated Trade Solution. https://wits.worldbank.org/ [34] (2014) United Nations National Accounts Main Aggregates Database. http://unstats.un.org/unsd/snaama/selbasicFast.asp [35] (2014) World Development Indicators (WDI) Database of the World Bank. http://databank.worldbank.org/data/home.aspx [36] City Distance Calculator. http://www.geobytes.com/citydistance.htm [37] Aitken, N.D. (1973) The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis. American Economic Review, 63, 881-892. [38] Bergstrand, J.H. (1985) The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence. The Review of Economics and Statistics, 67, 474-481. http://dx.doi.org/10.2307/1925976 [39] Matyas, L. (1997) Proper Econometric Specification of the Gravity Model. The World Economy, 20, 363-368. http://dx.doi.org/10.1111/1467-9701.00074 [40] Grauwe, P. and Skudelny, F. (2000) Inflation and Productivity Differentials in EMU. Working Paper, Center for Economic Studies, No. 0015. [41] Glick, R. and Rose, A.K. (2002) Does a Currency Union Affect Trade? The Time Series Evidence. European Economic Review, 46, 1125-1151. http://dx.doi.org/10.1016/S0014-2921(01)00202-1 [42] Egger, P. and Pfaffermayr, M. (2000) The Proper Econometric Specification of the Gravity Model Equation: A Three Way Model with Bilateral Trade Interaction Effects. Working Paper, Austrian Institute of Economic Research, Vienna. [43] Egger, P. (2000) A Note on the Proper Econometric Specification of the Gravity Equation. Economics Letters, 66, 25- 31. http://dx.doi.org/10.1016/S0165-1765(99)00183-4 [44] Eita, H. (2008) Determinants of Namibian Exports: A Gravity Model. Working Paper, 13th Annual Conference for Econometric Modeling in Africa, University of Pretoria, 9-11 July 2008, 1-23. [45] Sichei, M., Erero, J. and Gebreselassie, T. (2005) An Augmented Gravity Model of South Africa’s Exports of Transport Equipments and Machineries. Working Paper, Trade and Uneven Development: Opportunities and Challenges, Glenburn Lodge, 30 November-1 December 2005, 1-26. [46] Hadri, K. (2000) Testing for Stationarity in Heterogeneous Panel Data. The Econometrics Journal, 3, 148-161. http://dx.doi.org/10.1111/1368-423X.00043 [47] Levin, A., Lin, C.F. and Chu, C. (2002) Unit Roots Tests in Panel Data: Asymptotic and Finite Sample Properties. Journal of Econometrics, 108, 1-24. http://dx.doi.org/10.1016/S0304-4076(01)00098-7