Analysis of international trade integration of Eurasian countries: gravity model approach

Abstract

The recent changes in world politics and economy, along with the breakup of the Iron Curtain, directly influenced the foreign trade structure of the Eurasian countries. The foreign trade relations, controlled by the central planning during the Union of Soviet Socialist Republics (USSR) era, began to be formed according to free-market conditions. In this paper, empirical gravity models, covering data of 86 countries for the 1994–2018 period, are used to determine factors affecting the international integration process of the Eurasian countries. For these purposes, we estimated the classical and augmented gravity models to scrutinize the effects of border, infrastructure, trade policies, and institutions, along with the main factors. Based on the estimation results, we concluded that the Eurasian countries during the analysis period were 35% less integrated with the world trade system than the predicted potential level.