Does gravity matter? Evidence from Nepal’s trade pattern

Jinhwan Oh and Laxmi Prasad Prasai
Additional contact information
Jinhwan Oh: Graduate School of International Studies, Ewha Womans University, Republic of Korea
Laxmi Prasad Prasai: Graduate School of International Relations, International University of Japan, Japan

International Area Studies Review, 2012, vol. 15, issue 2, 161-175

Abstract: In the midst of globalization, trade of goods and services has been increasingly important. As a World Trade Organization member, Nepal is no exception. Using the gravity model, this study examines Nepal’s trade pattern by analysing a panel dataset of the country’s bilateral trade flows with 94 countries for 29 years (1981–2009). The empirical results for the entire dataset followed the general prediction of the gravity model (positive coefficients for economic size and negative coefficients for distance). When the data was examined by dividing it into two based on Nepal’s economic liberalization in 1991, no significant structural breaks were found. However, when the dataset was re-examined by comparing the actual trade flows with the estimated ones, it was found that Nepal’s trade flows with China, Japan and ASEAN members were undermined, whereas its trade with India was excessively concentrated. It is therefore suggested that Nepal diversify its trading activities and reduce its trade dependency on India.

Keywords: Gravity model; panel data; bilateral trade; simulation; Nepal (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/2233865912447086 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:intare:v:15:y:2012:i:2:p:161-175

DOI: 10.1177/2233865912447086

Access Statistics for this article

More articles in International Area Studies Review from Center for International Area Studies, Hankuk University of Foreign Studies
Bibliographic data for series maintained by SAGE Publications ().