ODREDNICE ROBNE TRGOVINE REPUBLIKE HRVATSKE: BAYESOV MODEL UPROSJEČIVANJA
DETERMINANTS OF CROATIAN MERCHANDISE TRADE: BAYESIAN MODEL AVERAGING

Summary/Abstract: This paper aims to evaluate competing theoretical approaches to explain merchandise trade of the Republic of Croatia. Following analytical framework derived from competing theories of international trade Croatian merchandise trade pattern was examined. Paper considers the influence of geographical distance between major cities, number of citizens older than 15 years, investment in research and development, level of gross domestic product, production factor abundance and financial index development to export and import of Republic of Croatia. Regarding the number of potential independent variables and the sample size this paper applies Bayesian model averaging. Using data sample of international merchandise trade between the Republic of Croatia and 26 trading partners in 2019, empirical results pointed towards geographical distance and number of citizens older than 15 years as main drivers of international merchandise trade. Empirical findings were in line with theoretical assumption suggesting transport costs are relevant drivers of both Croatian merchandise imports and exports. Number of citizens can be interpreted ambiguously. Number of citizens can be seen as market size or labor supply. Economies of scales might potentially be a relevant theory to explain Republic of Croatia’s merchandise trade, while further research should be directed toward its empirical evaluation in case of the Republic of Croatia.

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