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date: 19 June 2021

Abstract and Keywords

This article aims to explain trade flows in terms of the gravity equation (GE). The reason for focusing on GE is twofold. The first is that GE, unlike other frameworks, has had great empirical success in explaining bilateral trade flows. For a long time, however, GE was a child without a father in the sense that it was thought to have no theoretical support. Since the late 1970s, this state of affairs has changed radically. Now, the gravity equation has strong theoretical support and can be derived from a variety of models of international trade. The second is that GE can be used to sort out alternative hypotheses of international trade.

Keywords: gravity equation, international trade, bilateral trade flows, international trade models, trade hypotheses, empirical framework

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