The geographical pattern of New Zealand's international trade: An application of the gravity model

Abstract

This study uses the gravity model to analyse the geographical pattern of New Zealand's foreign trade, and the extent to which closer economic relations have influenced this pattern using cross‐section data separately for each of the years 1987 through to 1992. This is then repeated using pooled cross‐section time‐series data for the period 1987 to 1992. The model includes exporters’ and importers’ incomes and populations, the distance between them, and dummy variables for preference under APEC, the British Commonwealth and CER, and resistance to trade with Socialist countries, as explanatory variables. All the coefficients are found to be statistically significant and of the expected signs except for the CER coefficient. These coefficients also remain stable over the different years sampled and are not significantly different from those for the pooled data set. The results show APEC, British Commonwealth membership, and Socialism have a significant influence on New Zealand's trade pattern, whereas CER has not affected New Zealand's pattern of trade over the period studied.