Abstract
The foreign trade market is one of the most effective engines of economic growth in Egypt. Given its importance to the Egyptian economy, the factors influencing export flows between Egypt to its main trading partners need to be studied. The gravity model and panel data method is an essential and common approach for analyzing bilateral trade flows. It has proved to be a valuable method for analyzing a country’s trade potential and bilateral trade. This study applied the gravity model with geographical and financial variables. Moreover, it offers a new empirical perspective to indicate that these variables have analytical power to explain several factors that influence the cross-country trade flows; this research explores the relationship of Egyptian exports to 36 global trading partners across annual data covering a period from 2000 to 2018. In its random effect model of the panel data, the gravity model results showed that the main factors influencing the Egyptian bilateral trade are Egypt’s gross domestic product, importer’s gross domestic product, the border factor, and the distance between Egypt to the main trading partners. Some variables have a positive coefficient, like population, trade openness rate, and regional trade agreements, but they are insignificant for the Egyptian bilateral trade. The language factor is negative and insignificant to Egypt’s trade. These findings will enable Egypt’s government, policymakers, and traders to make suitable decisions to develop the influential role of Egypt’s international trade.
Highlights
Trade is considered to be the engine for developing the domestic economy, which can reduce the unemployment ratio through generating more job opportunities which can decline the poverty ratio (Shihab, Soufan, & Abdul-Khaliq, 2014), can relieve the burden on the balance of payments, expand the foreign trade market, facilitate delivering goods, raise the competition between countries that can enhance the quality of goods with affordable price, and can raise the income for both individuals and government as well (Ijeoma, 2013)
Several empirical types of research have been used classical gravity model through to analyze the foreign trade relationship over specific a period of time, for example, the researchers analyzed trade policy orientations in a gravity method to measure bilateral trade flows through 82 markets year effects from 1960 and 1992 (Hiscox & Kastner, 2002)
The foreign trade sector is the engine of the Egyptian economy
Summary
International trade in goods and services is one of the most important foreign. Trade means the exchanging of goods and services between countries. International trade is high means of surviving in this world of diversity and endowment for emerging economies. Trade plays a crucial role in growing the manufacturing sector more than the mineral and agriculture sectors. The Asian and Latin American economies’ experience provides good examples of the foreign trade sector’s importance to countries’ economic growth and development. That has led economists to emphasize that exports play a crucial role as a driver of economic expansion
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