Analyzing Bilateral Trade Flows of Bosnia and Herzegovina under the Framework of Gravity

Abstract

This study applies a modified gravity model of total trade to analyze Bosnia
and Herzegovina`s (BiH) trade flows with its major trade partners. The
results of this study show that major determinants of Bosnian total trade
flows and imports are distance, GDP per capita of Bosnia and Herzegovina,
GDP and population of trade partners, ex-Yugoslavian dummy and similarity
index. On the other hand, Bosnian exports are found to be determined by
distance, GDP per capita of BiH and trade partner, ex-Yugoslavian dummy
and similarity between countries` GDPs. The results support the hypothesis
showing that higher GDP per capita leads to higher trade, distance is a
trade diminishing factor and being part of the same country (Ex-Yugoslavia)
in the past has future implications of more trade than otherwise similar
countries.