Research on the determinants of bilateral trade between Romania and its major trading partners: panel data analysis based on the GLS gravity model
Research on the determinants of bilateral trade between Romania and its major trading partners: panel data analysis based on the GLS gravity model

Summary/Abstract: Based on the gravity model theory, this paper studies the determinants of bilateral trade flows between Romania and its main trading partners from 2010 to 2023. The research goal is to explore the role of economic size, geographical distance, institutional arrangements and foreign direct investment stock in promoting trade. To this end, this paper constructs an extended gravity model, using the generalized least squares method (GLSAR) and introducing a first-order autoregressive correction to deal with serial correlation and improve estimation accuracy. The model introduces variables such as GDP lagged term, FDI lagged term, geographical distance, border relations, Schengen membership and EU membership. The results show that economic size and geographical proximity are the core factors determining trade flows, while institutional integration and investment also have a significant driving effect on trade relations.

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