Do Gulf Cooperation Council Trade Determined By Geographical Proximity And Cultural Similarity?

Abstract

The aim of this paper is to examine the impact of cultural and geographic determinants on trade flows of the Gulf Cooperation Council (GCC) countries. For the methodology, we have used a gravity model to estimate the determinants of GCC exports and imports with 58 trading partners over the period 2000-2019. The findings show that the Fixed Effects Model (FEM) predicts that the effect of geographic proximity and cultural similarity on trade flows for GCC countries is insignificant. These results contradict the expected results of the gravity model. In addition, we extend the estimation of the gravitational model by using the Poisson pseudo-maximum likelihood with High-Dimensional Fixed-Effects (PPMLHDFE). The findings were impressive. We found that geographical distance and common language reduce GCC exports and imports. The colonial is an essential trading partner of the GCC countries.