Abstract:

In this paper we determine the efficiency of Romania’s external trade by analysing bilateral trade flows of goods and services between Romania and its trading partners. We will decide upon the efficiency of a trading partnership by comparing the real with the potential (estimated) bilateral trade flows. We will estimate the potential bilateral trade flows using an econometric trade model derived from the classical gravity model. As reggresors we used the classical gravity variables, i.e. the distance between the two countries and the GDP of the trading partner, and a series of dummy variables, such as if the countries share a common border, if the partner is a E.U. member, or if it is an important foreign investor in Romania.