India’s Trade and Gravity Model: A Static and Dynamic Panel Data

This paper examines the India’s trade flows using a gravity model for the period 1998-2012. We selected the following major trade partners: China PRP, United Arab Emirates, United States, Saudi Arab, Switzerland, Singapore, Germany, Hong Kong, Indonesia, Iraq, Japan, Belgium, Kuwait, Korea RP, Nigeria, Australia, United Kingdom, Iran, South Africa, and Qatar. In this research we apply a static and dynamic panel. We find evidence that political globalization and cultural proximity have a positive influence in bilateral trade. We also introduce economic size and common border these proxies confirming a positive impact of bilateral trade. These results show that the gravity model can explain the pattern of bloc’s trade.