Mercosur-European Union trade flows : a gravity model approach

Abstract

Nowadays, European Union and Mercosur are involved into a process of formal negotiations between their respective zones. Nevertheless, there are several previous trade agreements signed between both trade blocks since the negotiations began in 1995, until the negotiations were relaunched in 2010. This paper uses the gravity trade model to study and analyze these Mercosur-European Union trade flows. This model has been tested within a sample of 18 countries, six of them are currently members of Mercosur, and the other twelve are the main members of the European Union. In order to analyze commercial flows between these two integration agreements a gravity model is estimated, which reveals the impact that relevant variables have over time on international trade during last six years.