A Panel Data Analysis of South Korea’s Trade with OPEC Member Countries: The Gravity Model Approach

Ehsan Rasoulinezhad () and Gil Seong Kang ()
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Ehsan Rasoulinezhad: World Economy Department, Faculty of Economics, State University of St. Petersburg, Russia.
Gil Seong Kang: Department of Economics, Ministry of Strategy and Finance (MOSF), the Republic of Korea.

Iranian Economic Review (IER), 2016, vol. 20, issue 2, 203-224

Abstract: This paper explains bilateral trade patterns between South Korea and thirteen OPEC member countries over the period 1980-2014 using a gravity model. The estimation results show that the gravity equation fits the data reasonably well. We confirmed the existence of long term relationships between the bilateral trade flows and the main components of gravity model - GDP, income (GDP per capita), the difference in income, exchange rate, the openness level, distance and WTO membership – through the Fixed effects (FE), Random effects (RE) and the FMOLS approaches. The findings show that the trade pattern between South Korea and OPEC member countries relies on the Heckscher-Ohlin (H-O) theory, thus being explained by difference in factor endowments such as energy resources and technology. It is also found out that South Korea – OPEC trade is well explained by the factors that influence the energy security of South Korea such as oil reserves, transportation costs and political stability.

Keywords: Gravity Model; Bilateral Trade; South Korea; OPEC; Panel Data. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:20:y:2016:i:2:p:203

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