The evaluation of Turkey's foreign trade with different country groups within the framework of the gravity model

Abstract

The gravity model is based on the law known as the gravitational law discovered by Newton and was first used by Tinbergen to explain the foreign trade flow. It assumes that the size of the countries affects the foreign trade flow positively and the distance variable affects the foreign trade flow negatively. After the collapse of the Soviet Union, the Black Sea Economic Cooperation Organization was established under the leadership of Turkey to develop foreign trade with the countries that declared their autonomy. Similar to the story of the disintegrating Soviets, the Balkan Countries also declared their independence by leaving Yugoslavia. This study aims to investigate whether the gravity model is appropriate to explain Turkey’s exports and imports to the Black Sea Economic Cooperation (BSEC), Balkan and selected countries during the 1996-2019 period. Export and import were used as dependent variables. Gravity model variables such as GDP, distance, population, language and common border variables were used to explain the exports and imports of the respective countries. For all these models, panel data analysis techniques were employed; pooled, random and fixed effects models were estimated and then tests for the model selection were carried out to choose the most appropriate model. After the appropriate models were determined, the assumption tests were executed. As a result of the study, it was concluded that the gravity model was suitable to explain Turkey’s imports to the Balkan countries and exports to the selected country groups. The results of the study suggested that while the gravity model was suitable for explaining the factors affecting Turkey’s trade flow for some country groups, it further suggested that it was not suitable for some countries.