Trade creation and trade Diversion in the COMESA: Evidence of Kenya's import Flows in Food and Live Animals

Abstract

The paper used gravity model to analyze trade creation and trade diversion. All continous variables exhibited unit root at levels except for population, but all became stationary after first dfference. It was found that GDP was significant and positive as expected. Kenya's Population was also positive and significant but the estimate of the exporter population was negative. All were significant at 0.05 level, where P < 0.05. From the analysis, there was evidence of trade creation and trade diversion. It was recomended that the goverment to strongly push for free trade in order to fully realize the benefits therein.