Gravity model of tradeFrom Wikipedia, the free encyclopedia
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The
gravity model of trade in
international economics, similar to other
gravity models in
social science, predicts bilateral
trade flows based on the economic sizes of (often using
GDP measurements) and distance between two units. The model was first used by
Walter Isard in 1954. The basic theoretical model for trade between two countries (i and j) takes the form of:

Where F is the trade flow, M is the economic mass of each country, D is the distance and G is a constant. The model has also been used in
international relations to evaluate the impact of
treaties and
alliances on
trade, and it has been used to test the effectiveness of trade agreements and organizations such as the
North American Free Trade Agreement (NAFTA) and the
World Trade Organization (WTO).
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http://en.wikipedia.org/wiki/Gravity_model_of_trade