This paper implements a panel data approach for studying the determinants of and relationships between bilateral economic activities in terms of both trade and foreign direct investment between the EU member states. The familiar equation for testing the determinants of bilateral exports is...

Since the revival of the gravity literature in the early nineties most work has been done with cross-section data. Just a few more recent contributions made use of panel data. So far that research left open the question whether to treat time and country effects as random or fixed. This note...