A Gravity Approach to Determinants of Export in a Small Open Economy: ‎Evidence from Jordan

Abstract

This study seeks to identify the main factors affecting exports in small open economies. It uses panel data from 2001 to 2014 and a gravity model to identify these factors in one such economy. Our results are relevant for policymakers in small economies which engage in free trade agreements and trade liberalization to pursue economic development via trade openness and investment. We found mixed results as to the‏ ‏direction of the relationship between free trade agreements and exports, a positive ‎contribution of relative income in boosting exports and negative distortionary effects of distance ‎and costs on exports.‎ These findings suggest that there are differential impacts of trade liberalization over time on the export performance of small open economies. Hence, policies aiming to maximize the benefits of trade agreements and reduce costs may be helpful in promoting exports.Keywords: Gravity model, Export determinants, Economic growth.JEL Classifications: F1, F13, F43