ASSESSMENT OF THE INFLUENCE OF GEOGRAPHICAL DISTANCE ON THE FOREIGN TRADE INTERACTION OF THE RA ECONOMY USING GRAVITY MODELING / ՀՀ ՏՆՏԵՍՈՒԹՅԱՆ ԱՐՏԱՔԻՆ ԱՌԵՎՏՐԱՅԻՆ ՓՈԽԳՈՐԾԱԿՑՈՒԹՅԱՆ ՎՐԱ ԱՇԽԱՐՀԱԳՐԱԿԱՆ ՀԵՌԱՎՈՐՈՒԹՅԱՆ ԱԶԴԵՑՈՒԹՅԱՆ ԳՆԱՀԱՏՈՒՄ՝ ԳՐԱՎԻՏԱՑԻՈՆ ՄՈԴԵԼԱՎՈՐՄԱՄԲ

Abstract

In the complex field of international trade, the application of the gravity model plays a special role in studying the influence of geographic distance on the dynamics of Armenia's trade with various countries. Based on Tinbergen's theoretical framework, the gravity model represents a direct correlation between bilateral trade and the gross domestic product (GDP) of trading partners but is inversely proportional to the distance between them, similar to Isaac Newton's gravity equation. The traditional gravity model produces a predictable result for Armenia, showing that higher levels of countries' GDP encourage more trade between those countries, while distance is a barrier to trade between countries as transport costs rise. By expanding the model to include additional variables, the study presents an expanded gravity model that takes into account factors such as border proximity, membership in the Eurasian Economic Union (EAEU) and the European Union (EU), and the presence of free trade agreements. In the case of RA, the presence of a border does not contribute to improving trade relations, but in terms of population: the larger the population of a country, the fewer RA exports there are. The competitiveness of RA products and services is insufficient to enter large-scale sales markets. This is one of the reasons why Armenia is not a member of the EU. If there is a trade agreement between the Republic of Armenia and a given country, the export to that country is greater. Thus, the volume of trade with the member countries of the EAEU and the EU is respectively larger and smaller. The results of the analysis are influenced by the close trade relations between the Republic of Armenia and the Russian Federation, which may have distorted the correct picture in some places.