Vol 5 No 1 (2018)
Articles

Determinants of Africa - BRIC Countries Bilateral Trade Flows

Cosmas S. Mbogela
Mzumbe University Business School, Box 6 Mzumbe
Statistics
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Keywords
  • Gravity model,
  • Bilateral trade,
  • Trade flows,
  • Panel data,
  • Fixed effects model,
  • Random effect model,
  • BRIC countries
  • ...More
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Abstract

This paper uses gravity models to take advantage of the possibility to explicitly test the changes in trade patterns over time and examine how these changes differ across different regions in question. Using gravity models, the paper examines the determinants of trade flows of African countries with the emerging trading partners to Africa, namely Brazil, Russia, India and China (the BRIC). These countries are part of the five largest emerging economies that accounts for about 20 per cent of the world output and 27 per cent of the global trade flows. The study models some new variables in gravity models such as credit to private sectors, arable land as well as mobile cellular subscriptions.  The paper highlights some important truths, African countries where most of this bilateral trade with BRIC is concentrated includes those countries which are rich in natural resources, and in most cases they are the same with higher GDP per capita among the African countries. The coefficients variable arable land takes a positive sign with high statistical significance for the BRIC - Africa trade flow; and it indicate that the size arable land tend to statistically explain 65 per cent of the variations on exports for the bilateral trade flows.  The coefficients for the mobile cellular variable indicate a positive effect on the trade from BRIC to Africa. Mobile phones usage has a great potential to enhance the bilateral trade volumes of the African countries as well considering the limited infrastructural setup in the continent.