Searching for the Appropriate Measure of Multilateral Trade-Resistance Terms in the Gravity Model of Bilateral Trade Flows
DOI:
https://doi.org/10.12775/DEM.2014.002Keywords
, international trade, panel data, gravity model, multilateral trade-resistance terms, bilateral trade costs, globalization in the XXI century, Euro‘s effectAbstract
The aim of the paper is to compare different approximations of multilateral trade-resistance in the gravity model and the influence of their use on estimation results for models of EU-trade. Three synthetic variables: for bilateral trade costs, exporter’s and importer’s remoteness are used as an alternative for including time-varying country effects. Results indicate significant impact of those variables but not wholly compatible with the theory. Estimated coefficients of trade determinants, including Euro’s effects, have expected values in both approaches only if the FE estimator is applied.References
Anderson, J. (1979), A Theoretical Foundation for the Gravity Equation, The American Eco-nomic Review, 69(1), 106–116.
Anderson, J. E., van Wincoop, E. (2003), Gravity with Gravitas: A Solution to the Border Puzzle, The American Economic Review, 93(1), 170–192, DOI: http://dx.doi.org/10.1257/000282803321455214.
Anderson, J. E., Van Wincoop, E. (2004), Trade Costs, Journal of Economic Literature, 42(3), 691–751, DOI: http://dx.doi.org/10.1257/0022051042177649.
Anderson, J. (2011), The Gravity Model, The Annual Review of Economics, 3(1), 133–160, DOI: http://dx.doi.org/10.1146/annurev-economics-111809-125114.
Anderson, J. E., Yotov, Y. V. (2012), Gold Standard Gravity, Working Paper 17835, NBER.
Avinash, J. (2000), Background to Globalisation, Bombay: Center for Education and Docu-mentation.
Baier, S. L., Bergstrand, J. H. (2009), Bonus vetus OLS: a Simple Method for Approximating International Trade Cost Effects Using the Gravity Equation, Journal of International Economics, 77(1), 77–85, DOI: http://dx.doi.org/10.1016/j.jinteco.2008.10.004.
Baldwin, R., DiNino, V. (2006), Euros and Zeros: The Common Currency Effect on Trade in New Goods, HEI Working Paper, 21/2006.
Baldwin, R. and Taglioni, D. (2006), Gravity for Dummies and Dummies for Gravity Equa-tions, National Bureau of Economic Research Working Paper, 12516, NBER, Cam-bridge .
Baltagi, B.H., Egger, P., Pfaffermayr, M. (2003), A Generalized Design for Bilateral Trade Flow Models, Economics Letters, 80, 391–397, DOI: hhttp://dx.doi.org/10.1016/S0165-1765(03)00115-0.
Behar, A., Nelson, B. D (2012), Trade Flows, Multilateral Resistance, and Firm Heterogenei-ty, IMF Working Paper, WP/12/297.
Bergstrand, J. H. (1989), The Generalized Gravity Equation, Monopolistic Competition and the Factor-Proportions Theory in International Trade, The Review of Economics and Statistics, 71(1), 143–53, DOI: http://dx.doi.org/10.2307/1928061.
Bikker, J.A., De Vos, A. F. (1992), An International Trade Flow Model with Zero Observa-tions: an Extension of the Tobit Model, Brussels Economic Review, 135, 379-404.
Burda, M., Wyplosz, Ch. (2005), Macroeconomics: A European Text, Fourth Edition, Oxford University Press.
Bussière, M., Schnatz, B. (2009), Evaluating China’s Integration in World Trade with a Gravity Model Based Benchmark, Open Economies Review, Springer, 20(1), 85–111
Daly, H.E. (1999), Globalization Versus Internationalization: Some Implications, Global Policy Forum.
Deardoff, A. V. (1998), Determinants of Bilateral Trade: Does Gravity Work in a Neoclassi-cal World?, in Jeffrey A. Frankel (Ed.), The Regionalization of the World Economy, Chicago, University Press, 7–22.
Drzewoszewska, N., Pietrzak, M. B., Wilk, J. (2013), Gravity Model of Trade Flows between European Union Countries in the Era of Globalization, Roczniki Kolegium Analiz Ekonomicznych, 30, 187–202.
Eaton, J., Kortum, S. (2002), Technology, Geography, and Trade, Econometrica, 70(5): 1741–79, DOI: http://dx.doi.org/10.1111/1468-0262.00352.
Farhadi M, Ismail R, Fooladi M. (2012), Information and Communication Technology Use and Economic Growth, PLoS ONE 7(11), DOI: http://dx.doi.org/10.1371/journal.pone.0048903.
Feenstra, R.C. (2002), Border Effects and the Gravity Equation: Consistent Methods for Estimation, Scottish Journal of Political Economy, 49(5), 491–506, DOI: http://dx.doi.org/10.1111/1467-9485.00244.
Fernández-Avilés G., Montero J.M., Orlov A. (2012), Spatial Modeling of Stock Market Comovements, Finance Research Letters, 9(4), 202–212, DOI: http://dx.doi.org/10.1016/j.frl.2012.05.002.
Fidrmuc, J., Fidrmuc, J. (2001), Disintegration and Trade, ZEI Working Papers B, 24, ZEI – Center for European Integration Studies, University of Bonn.
Fidrmuc, J. (2009), Gravity Models in Integrated Panels, Empirical Economics, 37, 435–446, DOI: http://dx.doi.org/10.1007/s00181-008-0239-5.
Fiedman, T. (1999), The Lexus and the Olive Tree, New York: Farrar, Straus and Giroux.
Fratianni, M., Hoon Oh, Ch. (2007), On the Relationship between RTA Expansion and Open-ness, Kelley School of Business, DOI: http://dx.doi.org/10.2139/ssrn.995298.
García-Muñiz, A. S., Vicente, M.R. (2014), ICT Technologies in Europe: A Study of Techno-logical Diffusion and Economic Growth under Network Theory, Telecommunications Policy, 38(4), 360–370, DOI: http://dx.doi.org/10.1016/j.telpol.2013.12.003.
Glick, R., Rose, A. K. (2002), Does a Currency Union Affect Trade? The Time-Series Evi-dence, European Economic Review, 46(6), 1125–1151, DOI: http://dx.doi.org/10.1016/S0014-2921(01)00202-1.
Gómez-Herrera, E. (2013), Comparing Alternative Methods to Estimate Gravity Models of Bilateral Trade, Empirical Economics, 44 (3), 1087–1111.
Head, K., Mayer, T. (2002), Illusory Border Effects: Distance Mismeasurement Inflates Esti-mates of Home Bias in Trade, CEPII, Working Paper, 01.
Head, K. (2003), Gravity for Beginners, Mimeo, University of British Columbia.
Hsiao, C. (2003), Analysis of Panel Data, Second Edition, Cambridge University Press.
Linders, G. M., de Groot, H. L. (2006), Estimation of the gravity equation in the presence of zero flows, Tinbergen Institute Discussion Paper, 072/3, DOI: http://dx.doi.org/10.2139/ssrn.924160.
Maliszewska, M. A. (2004), New Member States Trading Potential Following EMU Acces-sion: A Gravity Approach, Studies and Analyses, CASE – Center for Social and Eco-nomic Research, 286, DOI: http://dx.doi.org/10.2139/ssrn.1441179.
Martin, W., Pham, C.S. (2008), Estimating the Gravity Model When Zero Trade Flows are Frequent, Economics Series Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
Martínez-Zarzoso, I., Felicitas Nowak-Lehmann, D., Vollmer, S. (2007), The Log of Gravity Revisited, Center for European, Governance and Economic Development Research, Discussion Papers 64.
Márquez-Ramos, L., Martínez-Zarzoso, I., Suárez-Burguet, C.( 2007), The Role of Distance in Gravity Regressions: Is There Really a Missing Globalisation Puzzle?, The B.E. Journal of Economic Analysis & Policy, 7(1), DOI: http://dx.doi.org/10.2202/1935-1682.1557.
Micco, A., Stein, E., Ordonez, G. (2002), Should the UK Join EMU?, Washington: Inter-American Development Bank.
Micco, A., Stein, E., Ordoñez, G. (2003), The Currency Union Effect on Trade: Early Evidence from EMU, Economic Policy, 18(37), 315–356, DOI: http://dx.doi.org/10.1111/1468-0327.00109_1.
Ramos, J., Ballell,P. (2009), Globalisation, New Technologies (ICT‘s) and Dual Labour Mar-kets: the Case of Europe, Journal of Information, Communication and Ethics in Society, 7(4), 258–279.
Rose, A., van Wincoop, E. (2001), National Money as a Barrier to International Trade: the Real Case for Currency Union, American Economic Review, 91(2), 386–90, DOI: http://dx.doi.org/10.1257/aer.91.2.386.
Ruiz, J., Vilarrubia, J. M. (2007), The Wise Use of Dummies in Gravity Models: Export Po-tentials in the Euromed Region, Banco de Espana Working Papers 0720, DOI: http://dx.doi.org/10.2139/ssrn.997992.
Santos Silva, J., Tenreyro, S. (2006), The Log of Gravity, The Review of Economics and Statistics, 88(4), 641–658, DOI: http://dx.doi.org/10.2139/ssrn.380442.
Schreiber, S. (2008), The Hausman Test Statistic can be Negative even Asymptotically, Journal of Economics and Statistics, 228(4), 394–405.
Soloaga, I., Winters, A. (2001), Regionalism in the Nineties: What Effect on Trade?", North American Journal of Economics and Finance, 12, 1–29, DOI: http://dx.doi.org/10.1016/S1062-9408(01)00042-0.
Tinbergen, J. (1962), Shaping the World Economy: Suggestions for an International Economic Policy, Twentieth Century Fund, New-York.
Tripathi, S., Leitão, N. C. (2013), India’s Trade and Gravity Model: A Static and Dynamic Panel Data, MPRA Paper, 45502.
Wei, S. J. (1996), Intra-National versus International Trade: How Stubborn are Nations inGlobal Integration?, National Bureau of Economic Research, Working Paper, 5531
Westerlund, J., Wilhelmsson, F. (2006), Estimating the Gravity Model without Gravity Using Panel Data, Nationalekonomiska Institutionen Department of Economics, Working Paper, DOI: http://dx.doi.org/10.1080/00036840802599784.
Downloads
Published
How to Cite
Issue
Section
License
The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).
To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.
Stats
Number of views and downloads: 607
Number of citations: 0
