ROMANIA’S EXPORTS IN CENTRAL AND EASTERN EUROPEAN COUNTRIES.A GRAVITY MODEL APPROACH

A popular approach to estimating the size of barriers to trade is the use of distance to infer trade costs in the framework of a gravity model. In this paper we are employing a classical gravity model with panel data in an attempt to identify the main determinants for Romania’s trade outflows towards Central and Eastern Europe, over the 1999-2013 periods. Based on different panel model specifications, we found that geographical distance, economic distance (captured by absolute GDP differentials between countries) and the level of development of the trade partners (provided by GDP per capita) are highly significant predictors for the volume of Romanian exports. The models indicated a strong negative influence of geographical distance, with an estimated coefficient slightly higher compared to the predictions of the traditional gravity models, a particular feature already detected in other empirical investigations on Southeast European trade