A Gravity Model of the Macedonian Export

Abstract

The current trend towards conclusion of regional trade agreements as well as the economic and political transformations of Central and Eastern Europe countries which initiate their integration in the world trade system has revitalized the interest in the gravity model of the international trade. The aim of this article is to estimate the Macedonian export using the gravity model based on the bilateral trade movements between Macedonia and its importing countries in 2005 based on the data from the State Statistical Office of Macedonia. Using the equation based on one country, we avoid the problems which appear with cross section and panel specification of the gravity model. The estimation of the gravity model has been done using the statistical software package Statgraphics Plus 5.1. According to the results of the model and the ratio between the actual and potential export, some directions for improvement of Macedonian export in the future are suggested.