Abstract
In this study, an empirical model of global trade in iron ore is developed and applied. The empirical specification is based on the trade gravity theory in which the trade is determined by the income of the trading countries, the distance between the countries, and other characteristics of the countries. The model is specified allowing for country-specific effects. The estimation is performed with panel data for global bilateral iron ore trade flows from 1980 to 2016 including 121 countries and almost 14,000 observations. The results indicate a strong support of the gravity model hypotheses. On average, the trade value is projected to increase by approximately 5% per year up until 2035. The trade potential of iron ore is estimated to 410 million USD per year. Applied to forecasting and policy analysis, the results represent another worthwhile source of information providing an alternative view of the global trade in iron ore that can be helpful for decision-makers.
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