Gravity Model

1387 Words6 Pages
Country Report Information


Huseyn Tagizade


Country F(billion) D(km) MM(bln dollars) G
Japan - - 5938 -
Australia 49.68 6860 1532.4 0.3
Korea 38.79 944 1222.8 5.04
United States 70 10162 16244.6 7.37
After II World War,Japan’s position in domestic and world market was considerably bad.Through several agreements and reforms things became to its normal track,however,not so fast.
In this research trade among Japan and other countries.In our investigation gravity model is applied.For a gravity model distance, GDP, and trade information is required .For our further analyses Australia, Korea, United States were choosen for their economic relations with Japan.

The Gravity Model formula is: Fij=G*Mi*Mj/Dij
Where Fij-is the quantity of trade between two countries, G- is gravitational constant, MiMj-GDPs of countries, Dij- is distance between countries i and j. Through using this formula we calculate G and the results are in table above.
As we see from the table as far as GDP the greatest nation is United States.With highest GDP in the table,preferences and several other factors make trade much more than its neighbor Korea. This is a direct result of a few reasons. As we probably aware:
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Moreover,it was only major advanced country that experienced negative economic growth in 2008. Japan’s banks suffered less than banks in US since Japanese held much less debt than their counterparts in US.No major Japanese bank collapsed.
Biggest hit was decrease in external demand. Drop in net exports was %11.8 declined. However, the US faced considerably less decline in demand rather than Japan. After acceleration of financial crisis, the yen appreciated rapidly. Thus, this appreciation was one of the reasons lowered net exports,
Japanese economy shrank %12.4 in the October-December period in annualized terms, and then experienced %15 drop in the following three months,far worse than
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