Gravity Model Of Trade Research Articles

Export of Travel Services in Western Balkans: A Gravity Model Approach

ABSTRACT This paper investigates the importance of travel service exports in Western Balkans countries. It identifies the key drivers and barriers in exporting travel services for five Western Balkan economies, in their intraregional trade and in trade in travel services with the EU. We use a gravity model, estimated over 2013–2019, applying the Poisson pseudo-maximum likelihood estimator. The results of the trade gravity model reveal that GDP, geographical distance, and cultural characteristics such as language and historical similarities and cultural heritage influence travel services.

Post COVID-19 International Economy Recovery: Forecasting Bilateral Trade Between U.S. and China

This paper aims to use an empirical analysis to study and forecast the bilateral trade between the United States of America and the Peoples Republic of China in the post-pandemic era. This study was conducted from three perspectives: aggregate demand (import), supply (export), and trading potentials. In sections of import and export analysis, the paper focuses on analyzing the aggregate behavior by households with Schmitt-Grohe, Uribe, Woodfords risk-averse demand model in an open economy and the firm production optimization model by Giovanni, Kalemli-zcan, Silva, and Yildirim. In the analysis of the bilateral trade potentials, a gravity model of trade with one least square regression was applied and subsidized with the test method from Liu. From the study, it was found that the bilateral import and export between the U.S. and China are facing challenges from stringent policies, fragmentation of global value chains, and the residual effects of the pandemic on consumption. Thereby, the trading potential between the U.S. and China is restrained to an intermediate level, which is not beneficial for the robust growth of bilateral trade in the future.

Recent vs Historical Migrants: A Study on the Canadian Provincial Trade-Migration Nexus

Abstract We contribute to the literature by exploring the variation in the trade-creating effect of migration networks across historical migrants and recent migrants by applying a micro-founded gravity model of trade. Both the stock of historical migrants and recent migrants variables are constructed by merging Canadian Census data with the migration data available in Statistics Canada. We address the endogeneity issue by applying IV estimators including two-step feasible GMM and PPML with IV and fixed effects by utilizing the imputed annual migration flow, the historical stock, and recent stock of migrants as instrumental variables proposed by Peri and Requena (2010). Taking Canadian geographical features into account, this study also applies carefully measured gravity variables. We control for the time-varying, exporter-year fixed effects, and importer-year fixed effects in a panel estimation. Estimated results show that annual migration, recent provincial stock of migrants, and historical stock of migrants significantly increase Canadian interprovincial trade. This impact is stronger for the stock of historical migrants relative to the stock of recent migrants and annual migration flow. Sub-sample analysis shows that both recent and historical migration consistently increase interprovincial service trade, only but not interprovincial goods trade. A greater combination of English and French-speaking provinces-pair significantly increases interprovincial trade. Regional trade agreements significantly impact the interprovincial trade of Canada. Our estimated results are robust to different estimation methods and alternative measures for the migrants’ stock and flow variables.

Effect of the Timber Legality Requirement System on Lumber Trade: Focusing on EUTR and Lacey Act

This study provides novel insights into the policy effects of timber legality verification methods, specifically Due-diligence (under the European Union Timber Regulation (EUTR)) and Due-care (under the Lacey Act), on coniferous and non-coniferous lumber trade, highlighting their significance in the context of global lumber trade. Timber legality verification plays a pivotal role in the global timber trade. We comprehensively assess the impact of verification methods on coniferous and non-coniferous lumber trade, utilizing two decades of trade data (1997–2017) across approximately 160 countries. We employ the difference-in-differences method based on the gravity model of international trade, utilizing robust export–import data and demographic profiles. Our findings demonstrate that the effect of EUTR on coniferous lumber imports ranged between −0.32% and −0.05%, and that on non-coniferous lumber imports ranged between −0.44% and −0.05%, whereas the effect of the Lacey Act on coniferous lumber imports ranged between −0.93% and −0.09%. Non-coniferous lumber imports remained unaffected. The Voluntary Partnership Agreement (VPA) led to decreased exports to the EU and US. Our findings hold two key implications. First, Due-diligence exhibits more consistent policy effects than Due-care. Second, supporting VPA-participating countries is crucial for facilitating timber trade. These insights inform timber trade policies and sustainable practices.

Preferential Trade Agreements and Civil Society Restrictions: Empirical Evidence from Gravity Model

This paper asks the question of how preferential trade agreements affect civil society restrictions. It argues that preferential trade agreements reduce civil society restrictions. However, this relationship varies across different types of trade agreements. We test the hypotheses using a gravity model of trade by incorporating directed-dyads data on PTAs and civil society restrictions from 1948 to 2009. The results suggest a curvilinear relationship between preferential trade agreements and civil society restrictions. Moreover, it appears that countries signing in-depth trade agreements increase civil society participation compared to the ones signing shallow trade agreements.

Evaluation and driving force analysis of the water-energy‑carbon nexus in agricultural trade for RCEP countries

Water utilization, energy consumption, and carbon emissions are mutually intertwined and play vital roles in agricultural supply chains. Identifying the water-energy‑carbon (WEC) nexus relationships along with its driving forces is of great importance to alleviate resource scarcity and advance a green economy. This study utilizes multiregional input–output (MRIO) analysis and proposes a new indicator, nexus intensity, to investigate the relationship among water, energy, and carbon flows in agricultural trade; furthermore, it modifies the gravity trade model to explore the hidden driving forces for the WEC nexus. The Regional Comprehensive Economic Partnership (RCEP) countries are used as a case study, and the results show that large volumes of WEC flow roughly from the southeast to the northwest. China plays an active role in agricultural trade, contributing 53.34%, 62.00%, and 64.09% of RCEP agriculture-related water utilization, energy consumption, and carbon emissions, respectively. For nexus intensity on the production side, countries with less agriculture-related WEC tend to have extreme situations of extreme resource utilization or emissions. Such situations have become more balanced on the consumption side. Exporters exert a greater impact on agricultural trade than importers. Small population countries such as Australia, New Zealand, and Cambodia serve as granaries for other countries. In addition, countries with higher carbon emissions tend to import carbon-intensive products from other countries. By analyzing the linkages between water, energy, and carbon associated with agricultural products and excavating driving forces, this study provides insights for nexus management on improving resource use efficiency and reducing carbon emissions through transnational trade.

Assessing the Seafood Trade Diversion Arising from Economic Sanctions: Evidence from Russia and Western Countries.

Since 2014, economic sanctions between Russia and Western nations have significantly altered the global seafood trade. The consequent decline in bilateral trade also had spillover effects on the rest of the world (ROW). According to earlier studies, economic sanctions appear to negatively impact bilateral trade and income. However, few studies examine how Russian sanctions affect the world as a whole and estimate their effects on the fisheries industry. This study seeks to close this gap by quantifying the extent to which Russian sanctions have impacted trade in terms of trade deflection, trade destruction, trade depression, and trade creation. To this end, panel data from 185 countries were created for the years from 2005 to 2020. With trade policy variables that account for changes in trade channels, a structural gravity trade model was specified. Based on calculations using the Poisson pseudo-maximum likelihood (PPML) fixed effect model, economic sanctions led to a 119.28% surge in Russia's seafood imports from the rest of the world (ROW), alongside a 39% decline in imports from Western countries. The extent of trade deflection, which includes the exports of Western nations diverted from Russia to the ROW markets, increased by 5.49%. The results demonstrate that trade between sanctioned states, as well as global trade, is significantly impacted by economic sanctions.

Research on the Trade Potential of Chinese Carpet

Chinese carpet export has a long history, and the current political and economic environment of the world is complex and changeable, and the economies of various countries have been affected to a certain extent. Therefore, by studying the export status of Chinese carpet and tapping the export potential of Chinese carpet, we can better promote China's economic growth under complex circumstances. This paper focuses on the export status of Chinese carpet, export trading partners and the international competitive advantage of Chinese carpet, and analyzes the factors affecting the export of Chinese carpet by establishing a trade gravity model, and estimates the export potential of Chinese carpet. On the basis of the research, the paper gives policy suggestions from the two perspectives of government and enterprise respectively.

Augmented Gravity Model of Trade with Social Network Analysis

The 2030 Agenda for Sustainable Development recognizes international trade as an engine for inclusive economic growth and poverty reduction, and an important means to achieve the sustainable development goals (SDGs). Given this role, international trade and global trade networks have received preeminent attention in recent times due to the sharp growth in trade volumes and their contributions to poverty reduction and sustainable development over the years. Despite the growth in global trade volumes and the associated benefits, there are worrying concerns about the unprecedented changes in international trade patterns and growing imbalances in trade in recent times. Whereas China’s trade volumes have more than tripled over recent decades and have maintained the largest trade surplus spot ahead of Germany, other major trade surplus countries such as Japan, the USA, etc., have become trade deficit countries with their trade volumes increasing at a much slower pace. In view of the growing changes in international trade patterns and the need to understand the dynamics of the widening global trade imbalances among major trading partners, this paper investigates the factors that determine the export performance of countries. More specifically, the purpose of this paper is to highlight the forces that determine the export performance of countries using an augmented gravity model that includes social networks. The paper provides useful insights into the underlying currents responsible for the changes in international trade patterns. Using data from 51 countries for 41 years, our results indicate that the GDP of both the home country and the partner country affects the home country’s exports positively. Similarly, the real effective exchange rate REER, trade openness OPEN, and dummy variables BORDER, ENGLISH, and EU have produced positive and statistically significant coefficient estimates, and these are in line with our theoretical expectations.

Bilateral political relations and the security of China's energy imports

As human demand for energy continues to grow, energy security has become an important research topic for national economic and social development. As the country with the highest energy demand and import in the world, China needs to ensure its energy import security in a personal way. Against this research background, this paper investigates the causal relationship between bilateral political relations and China's energy import security. This research selected HS 6-digit percentile trade data from 47 energy-exporting countries engaged in energy trade with China from 2000 to 2020. A trade gravity model was constructed to examine the impact of bilateral political relations on China's energy import security. Multiple empirical analyses were conducted using the PPMLHDFE method to investigate various aspects of the relationship. The research shows that: (1) Bilateral political relations can significantly affect China's energy trade imports. (2) The regional security situation of exporting countries and the signing of free trade agreements with China play a moderating role between bilateral political relations and energy imports. (3) In the heterogeneity analysis, the influence of bilateral political relations on China's energy trade has obvious stage characteristics, and the influence of bilateral political relations on China's energy trade is stronger in countries and regions along the Belt and Road Initiative, and there is a certain path-dependent type of China's energy imports.

The Internet’s Impact on Trade – An Analysis Applying the Gravity Theory

The gravity model of international trade analyzes synergistic trade flows based on the economic size and distance between two parts. The model suggests that trade tends to fall with distance due to geographical distance. This paper an analyzes the internet's impact on the geographical distance of the gravity model. Firstly, it briefly describes the gravity model focusing on the importance of geographical proximity. Secondly, it illustrates the introduction of the internet and changes that occurred by it specifically targeting intangible services developed through the introduction of the internet. Thirdly, it analyzes the internet's impact on the distance advantages with historical trade data. Lastly, this paper forecasts how the model will change due to an increasing information technology dominance economy

Assessing the Effect of Joining the World Trade Organization on Trade Performance: A Study of CIS Countries

This research delves into the impact of World Trade Organization (WTO) membership on trade dynamics in the Commonwealth of Independent States (CIS) region, focusing on the potential augmentation or diversion of trade resulting from CIS countries’ WTO accession. The study context is grounded in the interplay between regionalism, represented by regional trade agreements and historical connections, and global integration facilitated by WTO membership. The study also scrutinizes the potentially complicating role of the Eurasian Economic Union (EAEU) regional bloc, referencing the ‘Spaghetti Bowl’ phenomenon of overlapping trade agreements. The gravity model of trade serves as a conceptual foundation to understand the effects of WTO membership and regional trade agreements on trade costs. Empirical results suggest that WTO membership has not enhanced trade for the CIS. Instances of trade within the CIS region where there is only one WTO member have resulted in a positive trend, even though there is no robust evidence that it is due to WTO membership. The EAEU enhances trade and serves as a trading bloc within the region. This study highlights that while the WTO strives to foster trade liberalization and growth, its effects can be region-specific and complex, as demonstrated by the CIS region’s experience. The research also hints at the importance of intra-regional trade and unique regional factors as critical determinants of trade patterns, which can enhance broader trade expansion and economic development.

Evaluation of China-ASEAN trade status and trade potential: An empirical study based on a gravity model.

The objective of this study was to identify factors influencing the development of China-ASEAN trade- from the total economic volume of both sides, distance, the population size of ASEAN countries, the construction of a free trade area, and the signing of the Belt and Road initiative, resource endowment per capita, the exchange rate between RMB and ASEAN countries, and the land area of ASEAN countries-to develop a conceptual framework for China-ASEAN trade potential. This study uses panel data from 2001 to 2021 that is evenly distributed among 10 ASEAN countries to serve as the dataset. Firstly, the unit roots are checked and the cointegration relationships are examined, focusing on the heterogeneity test. Based on the classical trade gravity model, the innovative trade gravity model with key influencing factors is constructed. On the basis of the classical trade gravity model, an innovative trade gravity model of key influencing factors is constructed. The trade potential model is used to calculate the direct trade potential coefficient between China and ASEAN countries, which points out the direction for the sustainability of bilateral trade. This study finds that among the factors affecting China-ASEAN bilateral trade, the total economic output of both sides, distance, population size of ASEAN countries, the construction of the FTA, and the signing of the Belt and Road Initiative all have a positive impact on bilateral trade. Three influencing factors, namely per capita resource endowment, exchange rate between RMB and ASEAN countries, and the size of ASEAN countries, have a negative impact on bilateral trade, but to a lesser extent. The trade potential between China and Vietnam falls into the category of potential re-modelling, indicating that both sides are currently utilizing their trade potential to the greatest extent possible, that trade growth space is limited, and that new trade opportunities must be discovered. The trade potential index between China and nine ASEAN countries, excluding Vietnam, is in the potential-exploiting category, indicating that the potential has not been fully utilized by both sides and that there is still room for growth in the scale of trade between the two countries. With the shift of the world's economic center of gravity in the direction of Asia following COVID-19, China and ASEAN countries should seize the opportunity to strengthen their comprehensive strength and economic aggregates and further develop China's constructive role in the regional organization. The signing of the Belt and Road Initiative and the construction of a free trade zone has had a positive effect on the development of bilateral trade. Propose that: positive trade factors should continue to be strengthened, trade barriers should be removed, and new dynamics of bilateral trade growth should be enhanced.

Research on the Current Situation and Influencing Factors of China's Agricultural Exports to RCEP Member Countries

Agricultural trade has always been an important trade area between China and other RCEP members, and the formal landing of the RCEP agreement is bound to further promote China's agricultural exports to these countries. ASEAN, Japan and South Korea are China's main exporters, and Australia and New Zealand have great potential for agricultural trade. Based on the extended trade gravity model, the impact of influencing factors such as GDP, per capita GDP, geographical distance, population, agricultural land area, bilateral free trade agreements, tariffs and other influencing factors on China's export of agricultural products to other RCEP member countries was analyzed. The results show that GDP, per capita GDP, geographical distance, population size, and the establishment of bilateral free trade agreements have positive effects on China's export of agricultural products to other RCEP members. The primary weighted average tariffs and agricultural land area of other RCEP members have a negative impact on China's exports.

Exchange Rate Uncertainty and India’s Bilateral Trade: A Gravity Model Approach

Through a gravity model, the paper attempts to analyse the impact of exchange rate uncertainty on India’s gross bilateral trade flows between its top five trading partners and its SAARC partners. Categorising the industries into five segments, namely, agricultural raw materials, chemicals, textile and clothing, metals and all other commodities, over 18 years (2000–2018), a panel data technique has been applied to examine the effect. The empirical result suggests that even though an exchange rate uncertainty shrinks the bilateral trade flows of agricultural raw materials for SAARC members, it enhances the trade flows across all industry verticals for the top five trading partners. Following the gravity model of trade, the study further suggests that the volume of bilateral trade between countries is proportional to the product of each country’s economic growth and inversely proportional to the distance between them. JEL: F10, F14,O24,D81

Love of variety and gains from trade

We show analytically and quantitatively how gains from trade depend on love of variety, defined as the extent to which an additional product variety generates benefits in either final or intermediate consumption. To do this, we use a multi-country, multi-sector heterogeneous-firm gravity trade model where love of variety is parameterized separately from product substitutability using a generalized CES demand function. Counterfactual simulations based on a calibrated version of this model show that the gains from trade commonly vary by a proportion of one to three depending on the value of the love-of-variety elasticity. Trade war simulations also point to the strong sensitivity of the assessed impacts. We conclude that love of variety may be an important determinant of the gains from trade, an aspect that has so far been overlooked for the sake of convenience in the modeling framework and due to lack of empirical estimates.

Quantile regression for static panel data models with time-invariant regressors.

This paper proposes two new weighted quantile regression estimators for static panel data model with time-invariant regressors. The two new estimators can improve the estimation of the coefficients with time-invariant regressors, which are computationally convenient and simple to implement. Also, the paper shows consistency and asymptotic normality of the two proposed estimator for sequential and simultaneous N, T asymptotics. Monte Carlo simulation in various parameters sets proves the validity of the proposed approach. It has an empirical application to study the effects of the influence factors of China's exports using the trade gravity model.

How the "Rise of Great Power" Restrains Bilateral Trade Flows: Evidence from China and its Trading Partners

Abstract: This article employs the gravity model of trade to examine how political relations have impacted international trade in the Chinese context, specifically by incorporating discussion of China's political relations with its major trading partners. Using data from China's trading partners obtained between 1990 and 2019, the article uses the generalised method of moments (GMM) and lagged vector autoregression (VAR) model to investigate whether the associated geopolitical risks appear to be temporary or enduring. Empirical results have shown that political conflicts present lagged effects (three months later) on China's exports to other countries and total trade volume with other countries, but have instantaneous effects on China's imports from other countries. Additionally, Chinese President Xi Jinping has much greater political influence on trade compared to his two predecessors (Jiang Zemin and Hu Jintao). Such an increased level of power is due to a diplomatic policy shift in which the nation has moved away from "keeping a low profile" (taoguang yanghui) to focus on the "rise of great power" (daguo jueqi). The escalation of political tension between China and its major trading partners will continue to have negative impacts on trade until hegemony is fully realised.

Systematic Literature Review about Exploring the Relationship of Cross-border E-commerce and China's Foreign Trade Based on Different Models

The proportion of Chinese cross-border e-commerce in China's foreign trade has gradually increased in recent years. In the last few years, scholars have used different empirical test models such as the trade gravity model and coupling model to empirically test whether cross-border e-commerce can promote China's foreign trade from different perspectives. Based on researching and collating the academic journals in Chinese National Knowledge Infrastructure, this paper sorts out and reviews relevant literature studying relationship between cross-border e-commerce and China's foreign trade. Through the trade gravity model, the mutual promotion relationship between the development of cross-border e-commerce and China's foreign trade has been verified. The coupling model has also made clear of the fact that the coupling degree of the two systems has to be improved so as to continuously promote the development of cross-border e-commerce. On account of the existing researches, the new directions and prospects of future research are put forward in order to facilitate future researchers to better delve into the related topics of the interrelationship between cross-border e-commerce and the Chinese foreign trade economy.

Pak-Afghan Bilateral Trade:

Afghanistan and Pakistan are located at the junction of Central Asia and South Asia. Owing to geographical contiguity, common border, common culture and similar consumption patterns, bilateral trade between the two countries should have increased with the passage of time, in line with the assumptions of the Gravity Model of international trade. However, it has been observed that during the period 2012-2018, bilateral trade between the two countries has either stagnated or declined. There are various causes responsible for the declining trends in trade where this study uses both quantitative and qualitative evidences as primary and secondary data. The gravity model of trade was estimated by using random effect estimation technique for panel data set (secondary data). Furthermore, the trade potential was estimated which shows that Pak-Afghan trade is operating below potential level. For qualitative evidences, the input of the actual stakeholders (primary data) including traders, transporters, clearing agents and customs officials was taken and analyzed. The finding of the study shows that Pak-Afghan trade is operating below the potential level and is not in line with GMT. Similarly the non-tariff barriers (NTBs) for Pak-Afghan bilateral trade have resulted in trade diversion to Afghanistan’s trade with India, Iran and Uzbekistan.