4. The Table gives regression results for a gravity equation estimated for worldwide banana trade over 1989-2004. Dummies for the Framework Agreement and ACP countries are included as control variables to account for these countries' preferential regime. Table: Gravity Estimate, Banana Market Dep. Var: trade value OLS Observations: MFN Quota -0.671*** R-Squared Framework Agr. Dummy 0.426 ACP dummy 1.046*** Log Distance -1.119*** Log Importer's GDP 0.852*** Log Exporter's GDP 0.178 Constant -14.44* 6,983 0.81 a. What does the R-square measure? How well does the model explain Worldwide Banana Trade? [3 marks] b. Using the regression above, explain the trade theory of the gravity equation and show the gravity equation in log form for the banana market under normal trade. What are the elasticities of banana trade flows concerning the importing country's GDP relative to distance? Are the variables statistically significant, and explain what happens to banana trade flows if there is a 1 percentage increase in each of the variables? [12 marks] c. What is the elasticity of banana trade flows relative to special-regime variables, particularly the Framework Agreement dummy, MFN Quota dummy and ACP dummy? Identify which of the special regime variables are statistically significant and explain what happens to banana trade flows if there is a 1 percentage increase in each variable. [10 marks]