Gravity Equation

The gravity equation is a model used in international economics to predict the amount of trade between two countries. It suggests that trade volume increases with the countries' economic sizes (their GDPs) and decreases with the distance between them, which impacts shipping costs and other barriers. Think of it like Newton’s gravity law—larger economies "pull" more trade, and greater distances “weigh down” trade flows. So, bigger countries trade more, and countries close to each other tend to trade more, all other factors being equal.