The use of gravity models in the identification of the factors determining trade flows in the European Union

The article analyzes the impact of potential determinants on the level of trade volume between the member states of the European Union. As a result of the use of gravity model for panel data the identification of a significant impact of the size of the economies of the member states, their level of economic development, foreign direct investment, the level of the so-called trade freedom of countries and of significant differences in the level of economic development between trading partners on the level of their bilateral trade. Also, it confirmed the existence of a negative relationship between the geographical distance and the size of the countries and their mutual exchange and a significant increase in the level of exports, both from the EU-12 to EU-15, and vice versa.