Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model

Mosaad Mohamed Ismail Elgayish; Ahmed Abdelmaksoud Abdelaziz Ali

doi:doi:10.11648/j.ijber.20221103.20

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Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model

Mosaad Mohamed Ismail Elgayish, Ahmed Abdelmaksoud Abdelaziz Ali

Published in International Journal of Business and Economics Research (Volume 11, Issue 3)

Received: 3 June 2022 Accepted: 22 June 2022 Published: 29 June 2022

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Abstract

Egypt has been an active participant in COMESA since its inception. Egypt's trade flows with the members of COMESA have grown steadily since the agreement entered into force. This paper investigates the impact of the COMESA free trade agreement on Egypt's trade flows, focusing mainly on trade creation and trade diversion effects. Present paper employed the augmented gravity model to examine whether the COMESA agreement has created or diverted trade. The model is estimated with panel data for a sample of 52 countries that are COMESA's members and Egypt's main trading partners, spanning a 25-year period from 1994 to 2018 covering the period pre and post the agreement's implementation. The Poisson pseudo-maximum likelihood has been used to estimate the model to address zero trade flows and the presence of heteroscedasticity. To produce unbiased and consistent results, the omitted variables are addressed by controlling for time-variant multilateral resistance factors and unobserved time-invariant country characteristics. The findings show the formation of COMESA has resulted in trade creation between Egypt and members of COMESA. However, there is no evidence that the formation of COMESA has resulted in trade diversion. The results also show that, the conventional gravity model variables (GDPs, geographical distance, official common language, and being the importing country landlocked) are the major determinants of Egypt's trade flows. Based on the foregoing, in order to boost Egypt's trade flows with the COMESA to meet untapped potential, RTA schemes should address issues that impede intra-COMESA trade by improving diverse production, multi-country infrastructure, and policy coordination.

Published in	International Journal of Business and Economics Research (Volume 11, Issue 3)
DOI	10.11648/j.ijber.20221103.20
Page(s)	180-186
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

Trade Creation, Trade Diversion, COMESA, Gravity Model, Panel Data, PPML

References

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APA Style

Mosaad Mohamed Ismail Elgayish, Ahmed Abdelmaksoud Abdelaziz Ali. (2022). Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model. International Journal of Business and Economics Research, 11(3), 180-186. https://doi.org/10.11648/j.ijber.20221103.20

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ACS Style

Mosaad Mohamed Ismail Elgayish; Ahmed Abdelmaksoud Abdelaziz Ali. Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model. Int. J. Bus. Econ. Res. 2022, 11(3), 180-186. doi: 10.11648/j.ijber.20221103.20

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AMA Style

Mosaad Mohamed Ismail Elgayish, Ahmed Abdelmaksoud Abdelaziz Ali. Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model. Int J Bus Econ Res. 2022;11(3):180-186. doi: 10.11648/j.ijber.20221103.20

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@article{10.11648/j.ijber.20221103.20,
  author = {Mosaad Mohamed Ismail Elgayish and Ahmed Abdelmaksoud Abdelaziz Ali},
  title = {Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model},
  journal = {International Journal of Business and Economics Research},
  volume = {11},
  number = {3},
  pages = {180-186},
  doi = {10.11648/j.ijber.20221103.20},
  url = {https://doi.org/10.11648/j.ijber.20221103.20},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20221103.20},
  abstract = {Egypt has been an active participant in COMESA since its inception. Egypt's trade flows with the members of COMESA have grown steadily since the agreement entered into force. This paper investigates the impact of the COMESA free trade agreement on Egypt's trade flows, focusing mainly on trade creation and trade diversion effects. Present paper employed the augmented gravity model to examine whether the COMESA agreement has created or diverted trade. The model is estimated with panel data for a sample of 52 countries that are COMESA's members and Egypt's main trading partners, spanning a 25-year period from 1994 to 2018 covering the period pre and post the agreement's implementation. The Poisson pseudo-maximum likelihood has been used to estimate the model to address zero trade flows and the presence of heteroscedasticity. To produce unbiased and consistent results, the omitted variables are addressed by controlling for time-variant multilateral resistance factors and unobserved time-invariant country characteristics. The findings show the formation of COMESA has resulted in trade creation between Egypt and members of COMESA. However, there is no evidence that the formation of COMESA has resulted in trade diversion. The results also show that, the conventional gravity model variables (GDPs, geographical distance, official common language, and being the importing country landlocked) are the major determinants of Egypt's trade flows. Based on the foregoing, in order to boost Egypt's trade flows with the COMESA to meet untapped potential, RTA schemes should address issues that impede intra-COMESA trade by improving diverse production, multi-country infrastructure, and policy coordination.},
 year = {2022}
}

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TY  - JOUR
T1  - Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model
AU  - Mosaad Mohamed Ismail Elgayish
AU  - Ahmed Abdelmaksoud Abdelaziz Ali
Y1  - 2022/06/29
PY  - 2022
N1  - https://doi.org/10.11648/j.ijber.20221103.20
DO  - 10.11648/j.ijber.20221103.20
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 180
EP  - 186
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20221103.20
AB  - Egypt has been an active participant in COMESA since its inception. Egypt's trade flows with the members of COMESA have grown steadily since the agreement entered into force. This paper investigates the impact of the COMESA free trade agreement on Egypt's trade flows, focusing mainly on trade creation and trade diversion effects. Present paper employed the augmented gravity model to examine whether the COMESA agreement has created or diverted trade. The model is estimated with panel data for a sample of 52 countries that are COMESA's members and Egypt's main trading partners, spanning a 25-year period from 1994 to 2018 covering the period pre and post the agreement's implementation. The Poisson pseudo-maximum likelihood has been used to estimate the model to address zero trade flows and the presence of heteroscedasticity. To produce unbiased and consistent results, the omitted variables are addressed by controlling for time-variant multilateral resistance factors and unobserved time-invariant country characteristics. The findings show the formation of COMESA has resulted in trade creation between Egypt and members of COMESA. However, there is no evidence that the formation of COMESA has resulted in trade diversion. The results also show that, the conventional gravity model variables (GDPs, geographical distance, official common language, and being the importing country landlocked) are the major determinants of Egypt's trade flows. Based on the foregoing, in order to boost Egypt's trade flows with the COMESA to meet untapped potential, RTA schemes should address issues that impede intra-COMESA trade by improving diverse production, multi-country infrastructure, and policy coordination.
VL  - 11
IS  - 3
ER  -

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Author Information

Mosaad Mohamed Ismail Elgayish

Economics Department, Faculty of Politics & Economics, Beni-Suef University, Beni-Suef, Egypt
Ahmed Abdelmaksoud Abdelaziz Ali

Economics Department, Faculty of Politics & Economics, Beni-Suef University, Beni-Suef, Egypt

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APA Style

Mosaad Mohamed Ismail Elgayish, Ahmed Abdelmaksoud Abdelaziz Ali. (2022). Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model. International Journal of Business and Economics Research, 11(3), 180-186. https://doi.org/10.11648/j.ijber.20221103.20

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ACS Style

Mosaad Mohamed Ismail Elgayish; Ahmed Abdelmaksoud Abdelaziz Ali. Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model. Int. J. Bus. Econ. Res. 2022, 11(3), 180-186. doi: 10.11648/j.ijber.20221103.20

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AMA Style

Mosaad Mohamed Ismail Elgayish, Ahmed Abdelmaksoud Abdelaziz Ali. Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model. Int J Bus Econ Res. 2022;11(3):180-186. doi: 10.11648/j.ijber.20221103.20

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@article{10.11648/j.ijber.20221103.20,
  author = {Mosaad Mohamed Ismail Elgayish and Ahmed Abdelmaksoud Abdelaziz Ali},
  title = {Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model},
  journal = {International Journal of Business and Economics Research},
  volume = {11},
  number = {3},
  pages = {180-186},
  doi = {10.11648/j.ijber.20221103.20},
  url = {https://doi.org/10.11648/j.ijber.20221103.20},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20221103.20},
  abstract = {Egypt has been an active participant in COMESA since its inception. Egypt's trade flows with the members of COMESA have grown steadily since the agreement entered into force. This paper investigates the impact of the COMESA free trade agreement on Egypt's trade flows, focusing mainly on trade creation and trade diversion effects. Present paper employed the augmented gravity model to examine whether the COMESA agreement has created or diverted trade. The model is estimated with panel data for a sample of 52 countries that are COMESA's members and Egypt's main trading partners, spanning a 25-year period from 1994 to 2018 covering the period pre and post the agreement's implementation. The Poisson pseudo-maximum likelihood has been used to estimate the model to address zero trade flows and the presence of heteroscedasticity. To produce unbiased and consistent results, the omitted variables are addressed by controlling for time-variant multilateral resistance factors and unobserved time-invariant country characteristics. The findings show the formation of COMESA has resulted in trade creation between Egypt and members of COMESA. However, there is no evidence that the formation of COMESA has resulted in trade diversion. The results also show that, the conventional gravity model variables (GDPs, geographical distance, official common language, and being the importing country landlocked) are the major determinants of Egypt's trade flows. Based on the foregoing, in order to boost Egypt's trade flows with the COMESA to meet untapped potential, RTA schemes should address issues that impede intra-COMESA trade by improving diverse production, multi-country infrastructure, and policy coordination.},
 year = {2022}
}

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TY  - JOUR
T1  - Evaluating Trade Creation and Trade Diversion Effects Between Egypt and COMESA: Evidence from Gravity Model
AU  - Mosaad Mohamed Ismail Elgayish
AU  - Ahmed Abdelmaksoud Abdelaziz Ali
Y1  - 2022/06/29
PY  - 2022
N1  - https://doi.org/10.11648/j.ijber.20221103.20
DO  - 10.11648/j.ijber.20221103.20
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 180
EP  - 186
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20221103.20
AB  - Egypt has been an active participant in COMESA since its inception. Egypt's trade flows with the members of COMESA have grown steadily since the agreement entered into force. This paper investigates the impact of the COMESA free trade agreement on Egypt's trade flows, focusing mainly on trade creation and trade diversion effects. Present paper employed the augmented gravity model to examine whether the COMESA agreement has created or diverted trade. The model is estimated with panel data for a sample of 52 countries that are COMESA's members and Egypt's main trading partners, spanning a 25-year period from 1994 to 2018 covering the period pre and post the agreement's implementation. The Poisson pseudo-maximum likelihood has been used to estimate the model to address zero trade flows and the presence of heteroscedasticity. To produce unbiased and consistent results, the omitted variables are addressed by controlling for time-variant multilateral resistance factors and unobserved time-invariant country characteristics. The findings show the formation of COMESA has resulted in trade creation between Egypt and members of COMESA. However, there is no evidence that the formation of COMESA has resulted in trade diversion. The results also show that, the conventional gravity model variables (GDPs, geographical distance, official common language, and being the importing country landlocked) are the major determinants of Egypt's trade flows. Based on the foregoing, in order to boost Egypt's trade flows with the COMESA to meet untapped potential, RTA schemes should address issues that impede intra-COMESA trade by improving diverse production, multi-country infrastructure, and policy coordination.
VL  - 11
IS  - 3
ER  -

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