Analysis of Foreign Trade in Saudi Arabia using Gravity Model (1984-2015)

Abstract

This study aimed to analyzing the foreign trade of Saudi Arabia using the gravity model, which derives its theoretical origins from Newton's physics. The database of the Saudi General Authority for Statistics and the Direction of Trade issued by the International Monetary Fund has been used. Using GMM because of its important statistical characteristics, and comparing the results with the results of the random effects method and the fixed effects; it concluded that the size of the GDP of the two sides of the Parties of trade was significant and positive, while the effect of the economic distance was significant only on the import side, as well as the geographical distance, but with a positive sign. Inflation in the partner countries is also significant for exports and imports. The study could not prove any effect of cultural variable and trade agreements on the flow of Saudi trade across borders.