Abstract
Topicality.Trade is the most important tool of the world economy in terms of building ties between countries, strengthening their interaction in the international exchange of goods, services and intellectual labor products. Aim and tasks. The purpose of the article is to estimate trade and economic relations between the Kingdom of Saudi Arabia and Azerbaijan, to prove having correlations between basic economic variables. Research results.The macro, micro and institutional factors affecting trade are initially classified and in separately explained in the article. Moreover, all economic indicators influencing exports have been analyzed in detail. The international experience on the estimation of foreign trade potential has been then investigated, it is pointed out that there are several models considering available, but the most suitable for research is the gravity model. The essence of the gravitational model is explained and the economic literature is studied to determine its application mechanism. On the basis of the gravity model, the trade relations of Saudi Arabia and Azerbaijan have been estimated by the method of the least squares of econometrics. Thus, two models have been set up initially with the variables of export of Saudi Arabia and Azerbaijan. One of variables is real exchange rate and this variable for each country has been calculated and added to the models by years. Conclusion.The features characterizing the adequacy of these models have been analyzed by using the e-views software package. So that, seasonal adjustment, their stationary, heteroschedasticity/homoscedasticity, the ratio of determination, autocorrelation have been analyzed. The models have been adjusted accordingly depending on the test results. The results have been interpreted on the basis of coefficients and their economic essence has been analyzed. It has been proved that there are positive trade correlations between two countries. In the conclusion, a summary of research has been noted.
Highlights
Роз'яснено суть гравітаційної моделі та вивчається економічна література для визначення механізму її застосування
The model shown in (1) has been investigated using the Eviews software package and the results are presented in Table 7. -As can be observed, when Saudi Arabia's GDP increases by 1%, Saudi Arabia's exports rises by 2.38%
Because the growth in population increases consumption in the country, in this case, exported products and services are directed to domestic consumption. -When the real exchange rate of Saudi Arabia increases by 1%, the volume of exports decreases by 0.14%
Summary
Dij - the distance between i and j countries In this current model, GDP indicates the size of the the economy of two countries. The linear logarithmic model of the demand on exports of Saudi Arabia, conducted on the basis of the gravity model, is as follows: Log Exit = β0 + β1Log GDPit + β2Log GDPjt + β3Log POPit + β4Log POPjt +. Exit - the volume of exports of Azerbaijan in t year, GDPit - the GDP of Azerbaijan in t year, GDPjt - the GDP of Saudi Arabia in t year, POPit - the population of Azerbaijan in t year, POPjt - represents the population of Saudi Arabia in t year, Mit - the real exchange rate of Azerbaijani currency to Saudi currency in t year, İit – the volume of Saudi imports in t year, and uijt - the stochastic error in the model. The statistical data for 1995-2018 have been collected on an annual basis and taken from the official websites of the General Authority for Statistics in the Kingdom of Saudi Arabia, the State Statistical Committee of the Republic of Azerbaijan and the central banks of both countries (see Tables 1 and 2)
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