| dc.description.abstract | This study applies the gravity trade model to assess South Africa-Angola trade potential in the agricultural
sector. A step-by-step example of the model's empirical implementation is also provided. It is found that
the gravity model, with foundations in the physical sciences, is a useful instrument for the analysis of
bilateral trade flows. A panel data analysis is used to disentangle the time invariant country-specific effects
and to capture the relationships between the relevant variables over time. The study also finds that the
fixed effects model is to be preferred to the random effects gravity model. Furthermore, a number of
variables, namely, size of the economies, the oil price and exchange rates added to the standard gravity
equation, are found to be important determinants of bilateral trade flows. Overall, the simulation results
indicate that there is a potential for trade in the agricultural sector between these two countries. | |
