Does regionalism promote intra-regional trade? The case of ECO

We apply the gravity model to assess determinants of trade in the Economic Cooperation Organization (ECO) region. A particular attention is paid to evaluate the impact of ECO on regional trade. The model is estimated for a sample of 34 countries, the ten members of ECO and 24 as their main trading partners for a period of 32 years. Our results show that gravity model explains the trade flows well in the ECO region. We also find contiguity, common language and common religion as determinants of trade in the region. Importantly, the ECO dummy variable, which is the variable of our interest, is positive and significant in all the four specifications used, implying that the ECO membership foster trade in the region.