Proceedings of the 8th International Conference on Advanced Research in Business, Management and Economics
Year: 2024
DOI:
[PDF]
Modified Gravity Modeling of Analysis of International Trade Relations
Ivane Javakhishvili Tbilisi State University, Georgia
ABSTRACT:
For the analysis of international trade relations, demographic processes, problems of the regional economy, scientists widely use the principle of gravity, reflected in the relevant econometric models. The latter is a tool for analyzing the country’s trade potential, the use of which is important for a country with a small economy like Georgia. The paper presents the analysis of the main scientific approaches to the assessment of gravity models of international trade. Gravitational models of international trade have been significantly enriched over the last decade, which is related to the deepening of scientific research in this field and the creation of new modified models taking into account the trade specificities of countries. It is also clear that the existing models have strengths and weaknesses, considering which, the selection of a specific method of calculations depends on the specifics of trading partners, research goals and tasks. In our study, an alternative approach to considering the structural indicators of international trade is discussed, which is based on: calculating the distance and GDP between the countries participating in international trade. In addition, taking into account the trade and geographical specifics of our country, additional variables were introduced into the model, and as a result of the calculations made on this basis, justified conclusions were made, which fully reflect the features of the country’s foreign trade. By including new factors in the model, it was possible to make valid conclusions, which are important for the analysis and forecasting of the country’s foreign trade policy.
keywords: trading, gravity model, variables, modification, methodology