Gravity Model betwen Portugal and Regional Blocs

Abstract

Abstract The article analyses foreign trade between Portugal and the regional economic blocs, from 1980 to 2018. The main objective is to analyse foreign trade between regional blocs and its implications. A static gravity model was estimated using the Fixed Effects (FE) model, Random Effects (RE) model, Ordinary Least Squares (OLS) model and the Hausman Taylor estimator. The results show a negative impact of the distance variable on foreign trade between Portugal and the regional blocs, with a negative impact of 11 per cent, especially when trade is with countries such as the USA and South Africa. The reer variable does not show the expected sign and has a relatively small impact.