Gravity model of trade Flashcards
1
Q
What is the bilateral trade flot
A
sum of country x’s export to country Y and vice versa
2
Q
What does Gravity Model explain?
A
Role of economic size & distance in determining size of the TF across countries
3
Q
What are the assumptions in grav model?
A
positive relationship between economic mass & trade activity
negative relationship between physical distance and trade
