ERF 26th Annual Conference
The Determinants of Tunisia’s Trade Deficit in Recent Years: A Gravity Model Approach
No.
ERF26_20
Publisher
ERF
Date
June, 2020
Topic
C2. Single Equation Models
F1. Trade
A plethora of empirical research studies have unveiled the determinants of bilateral flows, mainly free trade agreements and institutions. However, little is known about their net effect on trade balance. In this paper we aim at identifying the factors at the origin of the widening of Tunisia’s trade deficit in recent years, using a sample of 164 Tunisia trading partners for the 1995 to 2016 period. More specifically, we analyze the trade balance effects of the quality of institutions and the various free trade agreements (FTA) concluded by Tunisia with its partners. Using an extended gravitational equation along with the Poisson Pseudo Maximum Likelihood technique, we find that Tunisia’s trade flows increase with the rise in income of Tunisia and its trading partners. In addition, only the AGADIR agreement and the FTA concluded with the European Union have had a beneficial effect on trade balance. The free trade agreement signed with Turkey has significantly contributed to an excess of Tunisia’s trade deficit, while the Pan-Arab FTA has a very limited effect on both exports and imports. Additionally, we find that the increase in corruption and political instability in Tunisia following the Arab Spring in 2011 associated with insufficient measures of control of corruption have had negative impacts on exports and trade balance.
Authors
Makrem Ben Doudou
Assistant Professor, Department of Economics, University of...
Authors
Christophe Rault
Full Professor of Economics, University of Orléans