This study investigates the trade patterns of Azerbaijan by using the
Gravity model approach. Bilateral trade, import, export, and non-oil
export has been analyzed as dependent variables. We used WITS and
CEPII datasets to run panel regression to explore the impact of economic
size (GDP per capita, population, land area) and geographical position
(distance) on bilateral trade. The results indicate that GDP per capita of
origin and destination countries is positively correlated with bilateral
trade and import while distance factor is found to be insignificant.
However, we explain the insignificance of distance by the large share of
products which is insensitive to geography and distance factors (share of
oil products in total export is more than 90% which rely on long-term
contracts). However, we found that distance has a negative impact on
non-oil export. Thus a 1% rise of GDP per capita for destination and
origin country leads to an increase in Non-Oil export by 0.67% and
0.51%, respectively.
Citation:
Rahimli, N., & Nazirov, M. (2021). Trade patterns of Azerbaijan: Gravity model approach. ASERC Journal of Socio-Economic Studies, 4(1), 29-42. DOI:10.30546/2663-7251.2021.4.1.29