Bìznes Inform (Nov 2022)
The Model of Economic Analysis of International Trade Between Ukraine and the European Union
Abstract
The equations of gravity have undergone a significant evolution since their initial application in economics. The conception is perceived as originating in physics. However, international trade studies allow to a more thorough analysis of the instances of gravity equations application. The conception of gravity, initially underestimated by economists and devoid of solid theoretical foundations, was rarely used in empirical research. However, at present this conception has become the main instrument of analysis. First of all, this is determined by its empirical utility, ability to take into account many factors that shape trade, and, as a result, flexibility of its application. Over the past few years, the use of the conception of gravity has led to the conclusion that economists are finding more and more accurate methods for evaluating econometric models and taking into account increasingly complex factors. As a result, they go beyond purely economic factors that influence the intensity of trade relations between countries. It is worth noting that the conceptions formulated in early theories of trade, such as absolute advantage, comparative advantage, proportions of the provision of factors of production, and many others are directed towards studying the nature, causes and consequences of international trade. The so-called basis for international trade was seen alternately in various factors: differences in labor productivity, different proportions in the provision of factors of production, the effect of scale, the different position of countries on the so-called ladder of technological progress, etc. Some theories see the reasons for trade in differences between countries, others (for example, intra-industry trade) – in similarities. An important topic is also the role of entities operating with foreign capital in creating the trade flows.
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