Bilateral Trade between Ethiopia and Sudan: Does FTA Make Them Better?
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Date
2012-06
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Addis Ababa University
Abstract
This paper has tried to evaluate the determinants of bilateral trade flows particularly the effect of the Free Trade Agreement (FTA) between Ethiopia and Sudan during the years 2002 to 2011. Based on Panel data, Static and Dynamic Gravity models are applied to assess the determinants of basic and export trade flows including FTA, GDP, population, exchange rate and distance.
Estimation results of the static model indicates that Economic size, FTA, distance are the basic factors affecting trade flows. Whereas the dynamic model shows the existence of strong correlation between the Ethiopian contemporary trades (export) flows and those of the previous year. Therefore, we see that the dynamic model fits the data better than the static one
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Keywords
Free Trade Agreement; Trade Flows; Gravity Model; Ethiopia