BELARUSIAN EXPORT POTENTIAL: A GRAVITY MODEL APPROACH

This research examines Belarusian export potential with Euro-centric and Russia-centric trade blocks, and analyzes key trade patterns of Belarusian exports during the period of 1998-2013. The empirical study applies the generalized gravity model of international trade, and uses the panel data technique for data analysis. The panel dataset includes Belarusian exports to 43key trade partners and 9 explanatory variables. The results show that the importer\u27s GDP and population, distance and a dummy variable for former soviet republics, are statistically significant for Belarusian exports. However, the real exchange rate, the Slavic language, and common borders were insignificant in the model. Consistent with the gravity model, the importer\u27s GDP and distance have the greatest explanatory power on Belarusian exports, with the expected positive and negative signs on the coefficients, respectively. The estimates of trade potential demonstrate that Belarus, surprisingly, overtrades with the Eurocentric trade block, mainly due to the remarkably high overtrade of 23 times with one country, the Netherlands. Moreover, the results reveal, unexpectedly, a high propensity to export to Ukraine and Russia, despite the already existing overtrade with the Russia-centric trade block. The empirical findings suggest that it would be desirable to increase the value and volume of Belarusian exports. Since none of the earlier studies on the potential of Belarusian exports have revealed the surprising results for Ukraine, Russia or the Netherlands, this study lays the foundation for further research in the area, and should be valuable for local policy-makers