Internationale Zeitschrift für Wirtschafts- und Managementwissenschaften

IS IT VIABLE AN ECONOMIC INTEGRATION AMONG ?CNETAC? COUNTRIES? EVIDENCE FROM GRAVITY EQUATION**

Abstract

Levent Aydin and Rustem Yanar

The Turkey?s new policy that is called ?Zero Problems with Neighbors? and increasing trade volume between Turkey and Middle East has ushered the idea of new regional cooperation in the Middle East. In July 2010 a multilateral regional free trade agreement was signed between Turkey, Syria, Jordan and Lebanon, the so-called ?Close Neighbors Economic and Trade Association Council? (CNETAC). The council envisages establishing a free-trade and visa free area. In addition it aims improving the cooperation in trade, transport, tourism and energy. This paper attempts to make a formal analysis of these issues, and estimates a gravity model of trade and migration flows to examine whether intra-region is lower or higher than what is predicted by an economic model. The results indicate that the variables traditionally included in the gravity equation present the expected signs and highlight the role played by intra-bloc effects. The estimated coefficients present, in most cases, the expected signs and magnitudes.