The gravity model approach to analysis of foreign trade conducted with Turkey and E7 countries

E7 represents the "Seven Developing Countries" with the largest emerging economic growth and potential. These countries are China, India, Russia, Brazil, Mexico, Indonesia and Turkey. The E7 countries, which reached the same economic size as G7 countries in 2015, are expected to reach twice the size of the G7 in the coming years. This study's main objective is to analyze whether or not the Gravity Model is suitable to analyze the trade between Turkey and the remaining E7 countries. For this purpose, firstly, the Basic Gravity Model is applied to analyze the the foreign trade volume. Later, two separate models are established by adding Linder and population variables to the equation. In this thesis, firstly E7 countries are evaluated in terms of overall structure, main economic indicators and foreign trade figures between the years of 2000-2018. According to this data, the trade statistics between Turkey and the rest of the E7 countries are assessed.In the following sections of the thesis, the gravity model, which effectively analyzes the international trade flows in terms of quality and scope, is discussed in detail. In the application segment of this thesis, the Panel Gravity Model is applied to analyze the foreign trade volume conducted between Turkey and the remaining E7 countries between the years of 2000-2018. According to the results of panel data analysis of Turkey's foreign trade volume, a positive correlation is shown between Turkey's GDP, the GDP of the remaining E7 countries and the populations of these countries. The distance variable, on the other hand, affects the trade volume negatively and significantly. In conclusion, there is no significant relationship found between the trade volume and Turkey's population and Linder variables.