Find trade between countries using the gravity equation model. The d.pdf

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This document provides GDP and distance data for France, Germany, and Sweden to predict trade between countries using the gravity model of trade. It gives the GDP and distances between Paris to Frankfurt, and Paris to Stockholm. It asks to use this information with the gravity model, where B=10.5 and distance exponent is 1.25, to predict trade between France-Germany and France-Sweden.

Formation

Find trade between countries using the gravity equation model. The distances from Paris,(
France), to:
Frankfurt, (Germany);
Stockholm, (Sweden);
are about 400 miles, 450 miles, respectively.
If GDPs are for:
Germany 3900 billions
France 2800 billions
Sweden 606 billions
Find trade between France and Germany and between France and Sweden. Assume B = 10.5 and
exponent of distance is 1.25 in the gravity equation model. What would be the predicted trade for
both cases.?

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