Dynamic Gravity Model Research Articles

A study on the influence of perceived distance on China's inbound Tourism and the interaction of non-economic distance: An analysis of dynamic extended gravity model based on 61 countries' entry data (2004-2018).

In the post-epidemic era, the restart of China's inbound tourism is imminent. However, there are gaps in our current understanding of how distance perception dynamically affects inbound tourism in China. In order to understand the past patterns of inbound tourism in China, we mapped the data of 61 countries of origin from 2004 to 2018 into a dynamic expanding gravity model to understand the effects of cultural distance, institutional distance, geographical distance, and economic distance on inbound tourism in China and revealed the dynamic interaction mechanism of non-economic distance perception on inbound tourism in China. Our research results show that cultural distance has a positive impact on China's inbound tourism, while institutional distance has a negative impact. The significant finding is that the dynamic interaction of the above two kinds of perceived distance can still have a positive impact on China's inbound tourism. Its practical significance is that it can counteract the influence of institutional distance by strengthening the cultural distance. Generally speaking, geographical distance and institutional distance restrict China's inbound tourism flow, while cultural distance, economic distance, and interactive perceptual distance promote China's inbound tourism flow.

Research on international trade flow analysis based on potential clustering network

Abstract International trade is an important part of the world economy, and the rapid development of big data and complex network theory provides the possibility of an in-depth study of international trade networks. This study constructs the international trade flow gravity model and international trade flow index system on the basis of the clustered dynamic panel gravity model. It explores the influencing factors of national trade flow and the fitting effect of the international trade gravity model through factor analysis and regression analysis of variables in the system. The sample data’s KMO value is 0.834, according to the results, and there is a significant correlation between the variables. The degree of explanation of the public factors to the original variables is more than 0.5, and the variance contribution rate of trade structure, marketized structure, population and macroeconomics, international capital, and exchange rate reaches 71.832%, which makes the factor analysis more effective. The R² value of the trade gravity model reaches 0.837, with a remarkable effect. Among the sample countries, the highest trade flow potential is the United States (125,467.0), while the lowest is Portugal (512.4). The national GDP and population have a significant effect on international trade flows. The volume of each trading country should be used as a reference basis for conducting trade transactions when conducting international trade.

Chaotic Characteristic Analysis of Dynamic Gravity Model with Fractal Structures via an Improved Conical Volume-Delay Function

Road traffic networks are chaotic and highly complex systems. In this paper, we introduce a dynamic gravity model that characterizes the behaviors of the O-D (origin-destination) traffic, such as equilibrium, period-doubling, chaos, and fractal in discrete time. In cases where the original cost function is used, the trip distribution model might degenerate into an all-or-nothing problem without the capacity constraints. To address this shortcoming, we propose substituting the original cost function with an improved conical volume-delay function. This new function retains some of the properties of the original cost function, and its parameters have the same meaning as those in the original function. Our analysis confirms that the double-constrained dynamic gravity model successfully characterizes complex traffic behavior because of the improved conical volume-delay function. Our analysis further shows that the three-parameter bifurcation diagram based on the period characteristics provides deep insight into the actual state of the road traffic networks. Investigating the properties of the model solutions, we further show that the new model is more effective in addressing the all-or-nothing problem.

Foreign Aid and Donor's Exports to the Recipients: The South Korean Case

This paper examined the relationship between foreign aid and export, for the case of Korea from 1965 to 2015. I argue that foreign aid promotes donor's export to the recipient for following reasons: (1) the explicit and implicit tied-aid agreements directly increase export; and (2) implementing aid policy involves transferring not only money but also people. Thus, it serves as building the political, economic, and social relationships between donor and recipient countries. Those spillover effects of foreign aid can increase the export of donor countries. By applying a dynamic gravity model with GMM estimators, I provided empirical evidence that Korean bilateral ODA is positively related to its export to the recipients. The result showed that the impact of Korean ODA on its exports is positive and more significant in the post-1990s. In specific, for the later period, a percentage increase in Korean bilateral aid is associated with 0.095% increase in export in the short-term and 0.22% increase in export in the long run.

The Effects of changes in Tariff Rates on Imports: Evidence from Kazakhstan

This paper is the continuation of the research on the impact of Eurasian Customs Union policies on the economy of Kazakhstan. The study provides new evidence on the effects of Customs Unions on its members. In particular, this paper investigates the impact of tariff rate changes in Kazakhstan due to the establishment of the Eurasian Economic Union. Kazakhstan joined Eurasian Customs Union in 2010. Then the Eurasian Customs Union became the Eurasian Economic Union in May 2014. Since the establishment of the ECU, Kazakhstan’s trade policy has experienced considerable change. The tariff rates in Kazakhstan with countries outside the ECU almost doubled, with average tariff rates increasing from 6.45 to 12.24 %. This paper uses the dataset on bilateral trade flows between ECU countries and other 195 countries for 20 years from 2000 to 2019. An empirical analysis is performed on a country level, and panel data techniques are used to estimate whether the increase in the tariffs with non-members of CU will lead to trade diversion with suppliers outside the CU. The analysis demonstrated that the increase in tariff rates negatively affected imports to Kazakhstan from non-ECU countries. The effect of tariff increase, using the dynamic gravity model and GMM econometric technique, is estimated to be a 1.8 % decrease in imports if the average external tariff rate of Kazakhstan increases by one percentage point (e. g. from 7 % to 8 %). Due to the increase in tariff rates, the overall estimated reduction of imports of Kazakhstan is 10.66 %.

The effects of trade cost components and uncertainty of time delay on bilateral export growth

This paper measures the trends, specifically for exporters, in bilateral trade costs and more specifically for costs associated with policy barriers. The study further examines the effects of different trade cost components on bilateral export flows via the dynamic panel gravity model. Empirical evidence shows that trade costs generally have a declining trend globally, however, in the case of emerging countries, this rate of decline is very low. The costs associated with non-tariff barriers in emerging countries have a greater role in the continuation of higher trade costs, in comparison to tariff barriers' costs. Likewise, the two-steps system GMM model's results suggest that the infrastructure quality, transportation costs, volatility of exchange rate, and uncertainty in time (days) delay are major hurdles in the sustainable growth of exports and indeed have rendered the exports uncompetitive in the world market, those are also sturdily supported by the prediction of the theory.

Https://www.insanvetoplum.org/sayilar/11-4/m0637

This study analyzes how bilateral trade between Turkey and Organisation for Economic Co-operation and Development (OECD) countries has been affected by the immigrant flows from Turkey to OECD countries. The main objective is to unveil which channels of foreign trade are affected by immigrant flows from Turkey to OECD countries. Most empirical studies examining the static relationship between international migration and bilateral foreign trade take advantage of panel gravity models. This paper outlines a new approach on using a dynamic panel gravity model to analyze the dynamic relationship between international migration and bilateral foreign trade. This study tests the impact of immigrant flows from Turkey to OECD countries on bilateral foreign trade between countries from 2000-2016 for the first time using the system GMM estimation method. The evidence from this study indicates the relationship between bilateral foreign trade and immigrant flows from Turkey to OECD countries from Turkey to have complementarity. In addition, this study’s findings indicate immigration flows from Turkey to OECD countries to contribute to the exports from immigrants’ host countries and to increase Turkey’s imports. The results show these immigrant flows to be effective by means of networking channels in terms of foreign trade.

Bayesian estimation of dynamic panel data gravity model

In this paper, we develop Bayesian estimation method for inference of dynamic panel data gravity model. Our method deals with the many zeros problem and at the same time, allows for lagged dependent variables and multiple sets of unobserved effects. We apply our Bayesian estimation algorithm to reexamine the contemporaneous effect of GATT/WTO membership on trade. We find that our dynamic gravity model fits the data better than the same model without the lagged dependent variables that is often used in the literature and trade flow in the previous period has a large and positive effect on trade flow in the current period. We also find that the GATT/WTO membership does not appear to have a contemporaneous effect on trade flow. This result is consistent with the findings ofsome studies in the literature, but not with those of others. These results show the importance of including lagged dependent variables and multiple sets of unobserved effects in gravity model estimation.

Corruption and Outward FDI: A Dynamic Gravity Approach

We study how the perception of bribery level in target markets by foreign investors shapes their investment behavior. The literature is dominated by two views arguing that inward FDI is deterred by (1) corruption in the host country, and (2) corruption differences between home and host markets. We shift the focus from recipient countries to investors’ perspective and develop a framework with distinctions between low and highly corrupt countries to evaluate their firms’ responses to clean and corrupt environments abroad reflected in their outward foreign investments. Applying a dynamic gravity model to a panel data on bilateral FDI among 36 OECD countries, we find that first, low-corruption sources of investment are deterred by widespread bribery in foreign markets and tend to commit more resources to clean environments. Second, and more interestingly, highly corrupt countries invest more in high-corruption target markets, supporting the corruption distance perspective.

The effect of non-tariff barriers reduction on trade of Kazakhstan

This article examines the impact of non-tariff barriers (NTBs) reduction on Kazakhstan’s trade due to the creation of the Eurasian Customs Union (ECU) in 2010. The assessment of the effect of NTBs reduction was carried out using a dynamic gravity model and econometric PMG method. The synchronization of the system of phytosanitary norms and the approval of a unified system of customs regulation have reduced the cost of trade. These innovations have reduced NTBs between ECU countries, which should increase trade flows between countries.According to the model’s estimates, the reduction in NTBs increased Kazakhstan’s imports from the ECU countries by 33% but did not have a significant impact on exports to these countries. That is, on average, Kazakhstani producers benefited less from joining the ECU than producers in other CU countries. These results confirm the findings of reports of international organizations that because of the creation of the ECU, non-tariff barriers between countries have significantly decreased. Unfortunately, Kazakh producers have not been able to take full advantage of the benefits of joining the ECU, and although NTBs between countries have decreased, total exports to ECU countries have not increased. At the same time, the reduction of barriers between countries allowed entrepreneurs from other countries to increase their exports to Kazakhstan (Kazakhstan’s imports) by 33 percent.

Determinants of Ethiopian Coffee Exports to Its Major Trade Partners: A Dynamic Gravity Model Approach

The aim of this article is to examine export determinants of Ethiopian coffee to 31 trade partner countries using a dynamic gravity model and system generalised moment method of estimation (GMM) for the period 1998–2016. Descriptive results showed that Ethiopia was exporting only 39% of its total coffee production, and 53.5% and 34.13% of Ethiopian coffee exports were directed to European and Asian countries, respectively, over the period 1998–2016. Regression results revealed that trade openness, population size of Ethiopia, foreign direct investment and institutional quality index of Ethiopia are positively and significantly affecting volume of Ethiopian coffee export. But population of partner countries, weighted distance, lagged export volume and real exchange rate are negatively and significantly influencing export volume of Ethiopian coffee. Hence, Ethiopia needs to diversify its export destinations and export items a way from primary agricultural exports to secondary industrial exports in order to secure dependable source of foreign currency. Also, controlling corruption, increasing government effectiveness, ensuring political stability promotion of foreign direct investment and encouraging trade liberalisation would help to boost the volume of Ethiopian coffee export. JEL Codes: F12, F13, F14

India’s Trade Integration with Top Mushroom Exporting Countries, Apragmatic Analysis by a Panel Dynamic Gravity Model

India’s Trade Integration with Top Mushroom Exporting Countries, Apragmatic Analysis by a Panel Dynamic Gravity Model

Evaluating Ethiopia's Agricultural Export Potential: Empirical Evidence Using Gravity Model

Given Ethiopia's export revenue is mainly from agricultural primary products, this study attempted to estimate the major determinants of Ethiopia's agricultural export over the study period (1995-2015) using a dynamic gravity model. The empirical results are in favor of the model as it is likely to produce consistent results where the lagged agricultural export has a positive and signicant eect on current agricultural export ows. Home country's population and trade openness are found to have a positive im- pact on agricultural export while importing country's population, distance and home country's contract-intensive money variables are found to be signicant in aecting Ethiopia's agricultural export negatively. Furthermore, European countries including Israel, Switzerland, Greece, Norway, Finland, Sweden, Romania and Austria remained to be the dominant future potential destinations. Thus, export promotion towards these economies must be prioritized through bilateral trade agreement arrangements and re- duction in public sector bottlenecks to exporters. Keywords : Ethiopia; Dynamic Gravity Model; Agricultural Export Potential; System GMM Estimator. DOI: 10.7176/JESD/11-21-01 Publication date: November 30 th 2020

Spatial-temporal Evolution and Determinants of the Belt and Road Initiative: A Maximum Entropy Gravity Model Approach

The spatial interaction model is an effective way to explore the geographical disparities inherent in the Belt and Road Initiative (BRI) by simulating spatial flows. The traditional gravity model implies the hypothesis of equilibrium points without any reference to when or how to achieve it. In this paper, a dynamic gravity model was established based on the Maximum Entropy (MaxEnt) theory to estimate and monitor the interconnection intensity and dynamic characters of bilateral relations. In order to detect the determinants of interconnection intensity, a Geodetector method was applied to identify and evaluate the determinants of spatial networks in five dimensions. The empirical study clearly demonstrates a heterogeneous and non-circular spatial structure. The main driving forces of spatial-temporal evolution are foreign direct investment, tourism and railway infrastructure construction, while determinants in different sub-regions show obvious spatial differentiation. Southeast Asian countries are typically multi-island area where aviation infrastructure plays a more important role. North and Central Asian countries regard oil as a pillar industry where power and port facilities have a greater impact on the interconnection. While Western Asian countries are mostly influenced by the railway infrastructure, Eastern European countries already have relatively robust infrastructure where tariff policies provide a greater impetus.

Determinants of bilateral trade between China and Africa: a gravity model approach

PurposeThe main purpose of this paper is to analyse the different factors affecting Sino-African trade based on the gravity model, and propose some solutions to improve the problems.Design/methodology/approachThe paper is based on an extended gravity model, including trade agreement and recession as explanatory variables. The impacts of trade agreement and economic recession on Sino-African imports and exports are examined.FindingsThe results show that the product of GDP affects African exports to China significantly and negatively, and affects African imports from China positively. Real exchange rate affects African exports to China positively, and affects African imports from China negatively. Population affect African exports to China significantly and positively, and affect African imports from China positively. Recession have negative effects on both African imports from China and exports to China but is only significant for imports. Agreement affects African imports from China and exports to China positively. Our findings confirm the impact of economic recession, and imply that the structure of African product exported to China should be improved, and trade agreements should be reinforced.Originality/valueThis paper contributes and extends the literature on Sino-African trade by improving the traditional gravity model to include the impact of all trade agreements, and their aggregating effects on trade. The paper also seeks to assess the trade impact of economic recession through a dynamic gravity model approach for which there has been no research done to our knowledge. In this regard, it provides new understanding of the trade pattern between China and Africa, and ways in improving the Sino-African bilateral trade.

Is Sino-Africa Bilateral Trade More than Resource Focused? The Rhetoric and the Reality

Abstract This study uses an augmented dynamic gravity model to identify the main contributing factors influencing bilateral trade between China and 46 African countries in general and to test whether Sino-Africa bilateral trade is more than resource focused in particular. Natural resource was captured by “oil exports” and “ores & metal exports,” and the empirical analysis verifies only “oil” not “ores & metals” to significantly influence the growing Sino-Africa bilateral trade. Thus, the empirical result partially supports the widely held view that natural resources are critical to bilateral trade between China and African countries. However, it is not true that Chinese engagement in Africa is exclusively due to natural resources as always portrayed. Apart from the oil factor, some other significant factors for the growing bilateral trade are identified. The study indicates there is a huge opportunity and potential for rapid expansion of Sino-Africa bilateral trade that is mutually beneficial.

Factors Influencing Cambodian Rice Exports: An Application of the Dynamic Panel Gravity Model

ABSTRACT This study aims to identify the major factors influencing the Cambodian rice exports through an application of the dynamic gravity framework estimated by the Generalized Least Square (GLS), the Poisson Pseudo-Maximum-Likelihood (PPML), and the Heckman Sample Selection models, based on a period of 22-year panel data (1995–2016) and a total of 40 selected importing partners. The results show that the historical ties, the policy of exchange rate and the agricultural land reform promote the rice exports; the expansion of the exports to the trading partners, especially the EU, China and the ASEAN countries are particularly highlighted. As a macroeconomic issue and resistance factor, the economic recession, impeding the exports flows, would require further special attentions.

Does good governance matter for FDI? New evidence from emerging countries using a static and dynamic panel gravity model approach

AbstractThis paper assesses the impact of institutional factors on foreign direct investment (FDI) attractiveness using a pool of 25 emerging host countries (ECs) for the period 1996–2012. In particular, the paper aims to examine whether higher institutional quality and good governance do improve FDI attractiveness, and thereby to identify which institutional factors are the main drivers of FDI in ECs. Using a static and dynamic panel gravity model with various estimation techniques, we find that FDI is positively and significantly influenced by political stability, government effectiveness and regulatory quality. The remaining set of governance indicators is found to be statistically significant and negatively linked to FDI. Our findings also show that factors like a larger GDP per capita difference between investing partner and ECs, higher degree of trade openness and better infrastructure have positive and significant effects on FDI attractiveness. These results have important policy implications for ECs. Fostering FDI inflows into these countries requires policymakers to improve the quality of their institutions and business climate through implementing sound economic policies and regulations.

Industrial energy prices and export competitiveness: evidence from India

This paper empirically measures the impact of sectoral energy price differential between trading partners on Indian exports. Using dynamic gravity model, we estimate the response of Indian exports for 11 energy-intensive sectors to sectoral-level energy price asymmetry. We observe the absence of the contemporaneous effect of energy price differential on Indian exports, but the presence of persistence effects. We find that a 10% increase in relative energy prices negatively affects Indian sectoral exports by about 1% ranging from 0.9% for chemicals to 1.4% for non-ferrous metals, revealing a larger impact for energy-intensive sectors. These small effects imply that the concerns of carbon leakage are largely overplayed.

A Dynamic Panel Gravity Model Application on the Determinant Factors of Ethiopia\u2019s Coffee Export Performance

Ethiopia’s coffee export earning percentage share in the total export has been rapidly waning over the last decades while it is the first commodity in currency grossing of the country. Since, this study analyses the determinant factors of Ethiopia’s coffee exports (ECE) performance, in the dimension of export sales, via a more realistic model application, dynamic panel gravity model. It commences with the disintegration of the determinant into supply- and demand-side factors. It used short panel data that comprise 71 countries of consistent Ethiopia’s coffee importers for the period of 11 years from 2005 to 2015. The panel unit root test of Harris–Tzavalis was made for each variable and applied the first difference transformation for the variables that had a unit root. The system model of a linear dynamic panel gravity model was specified and estimated with two-step general method moment estimation approach. The model results suggested that lagged ECE performance, real gross domestic product (GDP) of importing countries, Ethiopian population, Ethiopian real GDP, openness to trade of importing countries, Ethiopian institutional quality, and weighted distance were found to be the determinant factors of Ethiopia’s coffee exports performance. The study also implied policies that would promote institutional quality or permits favorable market environments, supply capacity, trade liberalization, and destination with relatively cheaper transportation costs in order to progress Ethiopia’s coffee exports performance.