Modelling Export Activity in a Multicountry Economic Area: The APEC Case

The gravity model has long been used for modelling and predicting trade flows. This paper generalises the gravity model allowing for proper representation of local and target country effects and also the business cycle(s). The new approach is based on a panel data framework (instead of a simple cross sectional or times series approach) where the additional information available from using both types of data is utilised to properly model all the specific effects. The model is then estimated for a panel of APEC countries.