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A comparative analysis of the determinants of South African bilateral trade flows with the European Union-Southern African Development Community economic partnership agreement and trade development and cooperation agreement

Simbarashe Mhaka () and Leward Jeke
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Leward Jeke: Department of Economics, Nelson Mandela University

No 1836, Working Papers from Department of Economics, Nelson Mandela University

Abstract: This paper presents the impact of economic size, market size and exchange rate on South Africa’s trade flows with the European Union under the Trade Development and Cooperation Agreement (TDCA). The paper also examines the effects of economic size, market size and exchange rate on South African trade flows with members of the Southern African Customs Union and of the European Union in what is called the European Union-Southern African Development Community Economic Partnership Agreement (EU-SADC EPA. The study exploits panel data on international trade of South Africa over the period 2000-’16. The empirical analysis relies on a panel data econometrics framework as an estimation technique for the gravity model of trade. In the panel data approach, the pooled OLS, fixed effects and random effects models are used for estimation. The results indicate a positive relationship between South Africa’s economic/market size and South Africa’s trade flows in the TDCA. In the EU-SADC EPA, the results show a positive relationship between economic size and market size with South Africa’s trade flows in the EU-SADC EPA. However, in the TDCA, the exchange rate and the trading partner’s market size have a negative outcome on South Africa trade flows. A negative relationship is shown between the exchange rate and South Africa’s trade flows in the EU-SADC EPA. The results also show that it is better for South Africa to trade in the EU-SADC EPA than to remain in the TDCA. The paper recommends that policy-makers select trading partners based on the sizes of their markets and economies.

Keywords: trade flows; economic size; market size; exchange rate; gravity model (search for similar items in EconPapers)
JEL-codes: C23 F13 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2018-12, Revised 2018-12
New Economics Papers: this item is included in nep-int
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http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1836.pdf First version, 2018 (application/pdf)

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