APLICATION OF GRAVITY MODEL FOR ANALYSIS OF BOSNIA AND HERZEGOVINA EXPORT

Abstract

During the last two decades, the gravity model has become very popular in analysis of bilateral trade, regardless of the real limitations of econometrics methods in estimation of model parameters. In this research we analyzed Bosnia and Herzegovina export in period from 2002 to 2011, using gravity model of trade. Gravity model is constructed on the basis of experience from previous empirical and theoretical research, and on the basis of achieved exports results of Bosnia and Herzegovina. The resulting gravity model of exports is used as the basis for the analysis of potential export growth opportunities and identifying potential markets which are not fully utilized. At the same time we got information about the risk of a possible reduction of exports in some countries. Research results should be used as the basis for the adjustment measures of foreign trade policy of Bosnia and Herzegovina in order to use the potential export indicated by this analysis.