Logistics Performance Index: A Catalyst for International Trade Growth - An Applied Study on Global Economies

Logistics and trade are integral components of global commerce, each playing a crucial role in exchanging goods and services across various markets. The logistics sector is crucial in addressing transportation challenges, optimizing storage capabilities, enhancing competitiveness, and facilitating trade. With the advent of technology and digitalization, there is a growing need to improve logistics performance to support the movements and flows of commercial transactions. However, the specific impact of logistics performance on trade remains to be seen. Therefore, there is a need to investigate the relationship between logistics performance and international trade and understand how much the logistics performance index (LPI) influences trade outcomes.
This study examines the relationship between the logistics performance index (LPI) and international trade, focusing on a sample of 77 countries worldwide in 2022. The research adopts a quantitative methodology, utilizing data from the LPI and macroeconomic indicators such as foreign direct investment, GDP, exchange rate, and merchandise trade as a percentage of GDP. The study will estimate the impact of these factors on merchandise trade. Notably, this study offers novelty by including a larger sample of countries than previous research, which often focuses on a limited number of countries or regions. Additionally, the analysis employs ordinary least squares (OLS) regression, contrasting with the prevalent use of gravity models in similar studies. By incorporating these unique features, this study provides valuable insights into the relationship between logistics performance and international trade.