Estimating Export Demand: An Empirical Analysis

Abstract

Export of a country plays major role since it affects many economic indicators/parameters/variables like current account deficit, foreign exchange reserves etc. Generally all the economies try to boost up the export sector and formulate strategy for the higher growth in export. Thus it is very important to investigate the determinants of the export demand for an economy. In this paper we have tried to find out the determinants of bilateral export which will be helpful for the policy makers in formulating policy. We have considered 15 countries which mean 105 country pairs. We have estimated the bilateral export demand function by using gravity model. We found that distance between two countries, product of GDP between two countries, openness, and real effective exchange rate are significantly affecting the bilateral export. We also found that exports are higher for countries sharing the common border. Moreover, common language has also positive impact on the bilateral export.