Intensity Analysis of World Trade Flow
There has been an increasing interest in the interdependence among economies in the world. This is partly because advanced economies are forced to expose themselves internationally in the globa] movement of trade liberalization in the post-war era on one hand and the structural adjustments in global division of labour required to promote more efflcient economic aid to countries in the 'South' on the other. Furthermore, it is also caused by the increased necessity for the harmonization of
... onization of cyclical policies among major economies in the present crisis of world monetary system. An increasing number of studies in world trade flow, traditionally the most important aspect of interdependence among economies, have been published recently.l This paper measures the interdependence among countries based on world trade matrix and analyzes factors affecting it. Traditional theory of international trade tells us that trade is determined by the difference in comparative advantage structures between countries. But many traditional theories were worked out in two-country models, and it has been pointed out by many writers that various other factors are important in determining trade in many country models, which will be given some empirical evidence in this paper. Two methods have been developed to analyze the world trade flows; gravity model and trade intensity index. In gravity model, trade between two countries is mechanistically determined by gross national products of exporting and importing countries and economic distance between the two. The GNP of an exporting country represents the size of its supply capacity and that of an importing country its total dernand. The volume of trade between the two countries tends to increase if the GNP of either country increases, and tends to decrease, if the economic distance between them (measured in terms of transport cost) increases.