The gravity model has long been used for modelling and predicting trade flows. This paper generalises the gravity model allowing for proper representation of local and target country effects and also the business cycle. The new approach is based on a panel data framework (instead of a simple...

We consider the estimation of the usual Gravity model of trade, which involves flows of trade, say exports, from country i to country j in time period t. We suggest an easy-to-implement generalised method of moments estimator that avoids the issues associated with the usual fixed effects...