BRICS-United Nations regional groups’ trade patterns: a panel-gravity approach

DOIhttps://doi.org/10.1108/JCEFTS-11-2017-0032
Date04 June 2018
Pages151-179
Publication Date04 June 2018
AuthorFarkhondeh Jabalameli,Ehsan Rasoulinezhad
SubjectEconomics,International economics
BRICS-United Nations
regional groups’ trade patterns:
a panel-gravity approach
Farkhondeh Jabalameli and Ehsan Rasoulinezhad
Faculty of Economics, University of Tehran, Tehran, Iran
Abstract
Purpose The purpose of this paper is to analyze and compare the similarities in the foreign trade patterns
of China and the other BRICS (Brazil, Russia, India, China and South Africa) members.
Design/methodology/approach Three panel data estimations, namely, xed effect, random effect and
fully modied ordinary least squares, have been conducted in this paper based on the gravitational model of
international trade for bilateral trade of each BRICS member with ve United Nations (UN) regional groups
from 2001 to 2015.
Findings The results revealed that Russia has a dissimilar trade pattern, based on the Heckscher–Ohlin
(H-O) framework, with these ve regional groups, while the other BRICS members follow the Linder
hypothesis. Furthermore, it was found that China has a faster pace of globalization, while the rest of the
BRICS members have experienced regionalization rather than globalization. In addition, geographical
distance, as a proxy for transportation cost, has a weaker negative effect on the trade patterns of China and
India, which makes the trade patterns of BRICS members dissimilar.
Originality/value To the best of the authors’ knowledge, this paper is the rst attempt to examine and
compare the BRICS member countries’ foreign trade pattern through a gravity trade approach.
Keywords Gravity model, Panel data, Bilateral trade
Paper type Research paper
1. Introduction
Over the past decades, a large number of studies have considered trade ows between
nations by modeling bilateral trade. One of the most popular international trade models that
have been extensively used to formulate trade ows between countries is the gravity model
of trade. It was rst discussed by Tinbergen (1962) and Poyhonen (1963) based on the idea
that bilateral trade-ows between two countries depend on national incomes and bilateral
distance (Rasoulinezhad, 2016). This pattern of relations between bilateral trade, economic
size and distance could help researchers analyze bilateral or multilateral trade between two
or more countries.
This study is the rst attempt to use a gravity trade model to analyze the bilateral trade
pattern of BRICS[1] member countries (Brazil, Russia, India, China and South Africa) from
2000 to 2015. The choice of these countries for this research was also motivated by the fact
that the BRICS members have become an important economic block of the world economy.
An analysis of the International Monetary Fund (IMF) data illustrates that the BRICS
members’ contribution to world economic growth in the past decade was more than 50 per
cent, and their economic growth rate will be higher than that of developed nations and other
emerging economies by 2030 (Ayhan Kose and Ozturk, 2014). The following gure
illustrates the gross domestic product (GDP) growth rate of BRICS economies from 2001 to
2015 (Figure 1).
Regional
groups’ trade
patterns
151
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 11 No. 2, 2018
pp. 151-179
© Emerald Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-11-2017-0032
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1754-4408.htm
As Figure 1 shows, among the BRICS economies, China and India have experienced a higher
stable GDP growth rate from 2001 to 2015. The Russian Federation showed a signicant
negative GDP growth rate from 2009 to 2010, when the global economic recession
signicantly hit its economy. Besides, the recent western sanctions have increased the
instability of its economic growth. Moreover, South Africa has experienced a smooth GDP
growth rate of 0-5 per cent, except in 2010, when the global economic recession harshly
affected its economy and labor market, with over a third of the labor force going out of work.
Brazil faced more uctuations in its economic growth trend than the other BRICS economies
between 2001 and 2015. Since 2009, Brazil has experienced various economic events, such as
the most overvalued currency in the world (in 2009) and a wide account decit (in 2014),
which increased the uctuations in the economic growth rate in the country.
Figure 2 shows the share of BRICS imports and exports in the world trade volume. It can
be seen that the contribution of BRICS to the world import and export volumes has gone up
smoothly between 2001 and 2015. The BRICS economies have developed trade with many
Figure 2.
Contribution of
BRICS to the world
trade volume (2001-
2015, in %)
Figure 1.
GDP economic
growth in BRICS
economies (2001-
2015, current US$)
JCEFTS
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