Modeling of the impact of free trade on the economic development of the country

Abstract

The article reveals the essence of the concept of "free trade" and identifies the main tools of this policy. The method of calculating the index of free trade is studied, the dynamics of the index of free trade of Ukraine for 2011-2020 and the dynamics of the components of this index are analyzed. Determining the impact of key factors on the level of GDP with the help of economic and mathematical tools allows you to form and propose ways to increase the level of economic development for Ukraine.

Purpose. The aim of the study is to assess the impact of free trade on the development of the country's economy using methods of economic and mathematical modeling.

Method (methodology). To study the impact of free trade on the economic development of the country, several models based on panel data were built. Gross domestic product was chosen as the result variable, with independent factors such as exports and imports, inflation, net foreign direct investment, labor, and the free trade index. In the study of panel data, the normal regression model (combined), the fixed effects model, and the random effects model were constructed. The constructed models were tested using the Hausman, Broysch-Pagan and Wald test. The comparative analysis of modeling results is carried out.

Results. The results showed the high accuracy of the constructed models and show that free trade, expressed by the index of free trade, has a negative impact on the economic development of the country, expressed in gross domestic product.