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An Augmented Gravity Model of South Africa's Exports of Transport Equipments and Machineries

Moses Sichei, Jean Erero and Tewodros Gebreselasie
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Moses Sichei: Department of Economics, University of Pretoria
Jean Erero: Department of Economics, University of Pretoria
Tewodros Gebreselasie: Department of Economics, University of Pretoria

No 200513, Working Papers from University of Pretoria, Department of Economics

Abstract: The study applies an augmented gravity equation to South Africa's exports of motor vehicles, parts & accessories (SIC 381-383) to 76 countries over the period 1994 to 2003. The study employs a dynamic panel data model to estimate long-run and short-run coefficients. First, it is shown that it takes about 16 months for exports to adjust. Second, a number of variables, namely, importer income, population, exchange rate, distance, free trade agreements are important determinants of bilateral trade flows for motor vehicles, parts & accessories. Third, the gravity model is solved stochastically to determine South Africa's optimistic, pessimistic and average potential exports to the 76 countries. Finally, estimates of the degree of variability of average potential exports are provided, which show that South Africa's trade with Germany, the United Kingdom and the United States have low variability.

Keywords: Gravity equation; dynamic panel data; trade potential; transport equipment and machineries (search for similar items in EconPapers)
JEL-codes: D24 I12 C65 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-12
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