Estimating trade flows : case of South Africa and BRICs

Abstract

This study examines the fundamental determinants of bilateral trade flows between South Africa and BRIC countries. This is done by exploring the magnitude of exports among these countries. The Gravity model approach is used as the preferred theoretical framework in explaining and evaluating successfully the bilateral trade flows between South Africa and BRIC countries The empirical part of this study uses panel data methodology covering the time period 2000-2012 and incorporates the five BRICS economies in the sample. The results of the regressions are subject to panel diagnostic test procedures. The study reveals that, on the one hand, there are positive and significant relationships between South African export flows with the BRICs and distance, language dummy, the BRICs’ GDP, the BRICs’ openness and population in South Africa. On the other hand, GDP in South Africa, real exchange rate and time dummy are found to be negatively related to export flows.