Stochastic Gravity Research Articles

India’s Trade Potential and Free Trade Agreements: A Stochastic Frontier Gravity Approach

This paper analyses the role of Free Trade Agreements in determining export and import efficiency levels in India using stochastic frontier version of gravity model. We estimate the impact of selected FTAs of India (its bilateral FTAs, FTA with ASEAN and South Asian FTA) and regulatory quality on the efficiency of exports and imports over the period of 2000–2014. The results indicate that India’s bilateral FTAs and its FTA with the ASEAN group help in improving the export and import efficiency respectively. However, the South Asian Free Trade Agreement is statistically insignificant for India’s export and import efficiency. The results also highlight importance of trading partners’ regulatory quality for enhancing the India’s trade efficiency and note that the impacts of regulatory quality are non-monotonic.

THE IMPACT OF COMPETITIVENESS ON TRADE EFFICIENCY: THE ASIAN EXPERIENCE BY USING THE STOCHASTIC FRONTIER GRAVITY MODEL

The purpose of this study is to examine the bilateral machinery and transport equipment trade efficiency of selected fourteen Asian countries by applying stochastic frontier gravity model. These selected countries have the top machinery and transport equipment trade (both export and import) volumes in Asia. The model we use includes variables such as income, market size of trading partners, distance, common culture, common border, common language and global economic crisis similar to earlier studies using the stochastic frontier gravity models. Our work, however, includes an extra variable called normalized revealed comparative advantage (NRCA) index additionally. The NRCA index is comparable across commodity, country and time. Thus, the NRCA index is calculated and then included in our stochastic frontier gravity model to see the impact of competitiveness (here measured by the NRCA index) on the efficiency of trade.

A study of the nonlinear response of the upper atmosphere to episodic and stochastic acoustic‐gravity wave forcing

AbstractPerturbations caused by geophysical and anthropogenic events on the ground have been observed to propagate upward and impact the upper atmosphere. Gravity waves with wavelengths less than 750 km are known to be responsible for the total electron content (TEC) perturbations and to play a significant role in the mass, momentum, and energy budgets of the mesosphere and lower thermosphere. These waves are, however, difficult to continuously measure, globally resolve, and deterministically specify in first‐principle ionosphere‐thermosphere (IT) models. In this study, we investigate IT response to induced acoustic‐gravity waves resulting from strong time‐varying lower atmospheric wave forcing, including a traveling wave packet (TWP) and stochastic gravity wave (SGW) fields using the nonlinear Global Ionosphere Thermosphere Model (GITM) with high‐resolution grids of 0.08° in longitude and latitude. When TWP and SGW forcing occurs concurrently, the induced gravity waves (GWs) cause variation of ±8.8% in neutral, ±6.2% in electron density, and ±1.5% in TEC. The magnitudes decrease by 2.4% (from ±8.8% to ±6.4%) with the SGW effects simulated separately and subtracted; importantly, interactions between TWP and SGW contribute to ±1.4% of the perturbations. On the other hand, the induced acoustic waves (AWs) cause variation of ±13.9% in neutral, ±2.1% in electron density, and ±0.4% in TEC. Furthermore, GWs sustain tens of minutes after the TWP has passed through the lower atmosphere and clear traveling ionospheric disturbances and traveling atmospheric disturbances are developed. We demonstrate that clear wave structures from an episodic event can be isolated even under a ubiquitously and overwhelmingly perturbed atmosphere.

Pakistan's agricultural exports, determinants and its potential: an application of stochastic frontier gravity model

ABSTRACTThe most important and imperative objective of the developing nations is rapid economic growth and exports are generally considered as an engine for economic growth. Being an agro-based economy, agriculture exports play pivotal role not only in economic growth but also in socioeconomic uplifting. This study aims at evaluating main determinants of agricultural exports of Pakistan by applying stochastic frontier gravity model over the period of 1995–2014 for a sample of 63 countries. In addition, the study also analyzes whether there is any untapped export potential between Pakistan and the trading partners in agriculture sector. The results confirm the consistency of gravity model for agriculture exports of Pakistan. Likewise, the estimates also point out that bilateral exchange as well as tariff rates also effect agriculture exports. The study has also incorporated the effect of common border, common culture, colonial history and preferential trading agreements by including their respective dummies. The study confirms the significance of each factor, except common language, with their respective magnitude. Moreover, technical efficiency estimates reveal that Pakistan has great export potential with neighboring, Middle Eastern and European countries.

Conformally related Einstein-Langevin equations for metric fluctuations in stochastic gravity

For a conformally-coupled scalar field we obtain the conformally-related Einstein-Langevin equations, using appropriate transformations for all the quantities in the equations between two conformally-related spacetimes. In particular, we analyze the transformations of the influence action, the stress energy tensor, the noise kernel and the dissipation kernel. In due course the fluctuation-dissipation relation is also discussed. The analysis in this paper thereby facilitates a general solution to the Einstein-Langevin equation once the solution of the equation in a simpler, conformally-related spacetime is known. For example, from the Minkowski solution of Martin and Verdaguer, those of the Einstein-Langevin equations in conformally-flat spacetimes, especially for spatially-flat Friedmann-Robertson-Walker models, can be readily obtained.

China’s outward FDI efficiency along the Belt and Road

Purpose The purpose of this paper is to estimate the China’s outward FDI efficiency and it determinants in 69 countries along the Belt and Road over the period of 2003-2013. Design/methodology/approach This paper defines the extent of the Belt and Road in terms of geographical boundaries, justifying the application of the stochastic frontier gravity model to the FDI analysis, and then constructing a frontier regression model to assess the China’s outward FDI efficiency and it determinants in countries along the Belt and Road. Findings Regarding the core gravity parameter estimates, China’s outward FDI was highly consistent with the gravity model. As far as policy parameters are concerned, China’s outward FDI was significantly restricted by some man-made barriers in host countries. According to the estimated FDI efficiency scores, China has huge outward FDI potential in countries along the Belt and Road. In general, China’s outward FDI efficiency demonstrated a consistent uptrend from the perspectives of both FDI flows and stocks over the period of 2003-2013. Although China’s outward FDI performance indicated a very uneven pattern across different countries and periods, there were no significant performance differences between the Road and Belt. Practical implications The Belt and Road initiative can be largely beneficial to China’s outward FDI, but the specific framework of cooperation should be designed on the basis of determinants of China’s outward FDI. The regional cooperation with the Road countries should mainly focus on the removal of business barriers and financial barriers. The regional cooperation with the Belt countries should mainly concern the improvement of local intellectual property protection, the reduction of local tax burden, and removal of business barriers and financial barriers. Originality/value To the authors’ best knowledge, no existing literature has specifically examined the efficiency of China’s outward FDI in the countries along the Belt and Road and its determinants.

Noise kernel for the Reissner-Nordström metric: Results at the Cauchy horizon

We obtain a point-separated noise kernel for the Reissner-Nordstr\"om metric. The noise kernel defines the fluctuations of the quantum stress tensor and is of central importance to semiclassical stochastic gravity. The metric is modeled as gravitationally collapsing spacetime, by using suitable coordinate transformations, defined earlier. The fluctuations of the quantum stress tensor, at the final stage of collapse, are then analyzed for both the naked singularity and black hole end states. The behavior of this noise kernel, at the Cauchy horizon (CH) for naked singularity, shows markedly different behavior from the self-similar Tolman-Bondi metric, which was obtained earlier. In the latter a very unique divergence was seen, which does not appear for the Reissner-Nordstr\"om metric here. It is known that the quantum stress tensor itself diverges at the CH for both of these metrics. In contrast, it can now be seen that the fluctuations of the stress tensor behave differently for the two cases. We give a discussion and further directions for investigations of this interesting behavior in the two cases (regarding the collapse scenario).

Information and Communication Technology-Enabled Modern Services Export Performances of Asian Economies

Advancements in information and communication technology (ICT) have expanded the possibilities for trade in modern services. Many emerging and developed Asian economies are increasingly participating in these new trade activities. This study examines the export performances of emerging and developed Asian economies in selected modern services—computer and information, business and professional, and telecommunications—using a stochastic frontier gravity model. Estimation results show that the performances of emerging economies in South Asia and the Association of Southeast Asian Nations (ASEAN), in terms of realization of export potential, are considerably weaker than those of developed economies in North America and Europe. The results show that the number of graduates and the quality of ICT infrastructure in emerging economies are among the key factors in realizing services export potential. These findings suggest that emerging economies need to remove behind-the-border constraints and adopt advanced technologies to catch up with high-performing developed economies.

Export Growth, Export Potentialand Export Resistance: A Case Study of Laos

This study applies a stochastic frontier gravity model to examine Laos’ export potential as well as factors hindering its export growth. This article uses a panel data of thirty-four importing countries from 2001 to 2011. Three main export growth factors are analysed in the model: (i) core factors (income per capita, population, and distance); (ii) implicit behind-the-border constraints; and (iii) implicit beyond-the-border constraints. The findings show that only half of the country’s export potential has been realized to date and export losses can primarily be attributed to implicit behind-the-border constraints. At the same time, these constraints have been reduced during the last decade. This article identifies border trade, a common language, income per capita and the Generalized System of Preferences scheme as important factors for export growth. Conversely, it finds that an appreciating real exchange rate is a signal of a slowdown in export growth.

Comparative Advantage, Institutions and 'Behind the Border' Obstacles

Institutions are source of comparative advantage or disadvantage in international trade. Socio-economic and political constraints also matter for creating comparative advantage and affect the trade pattern of a country. These diverse ‘beyond the border’ and ‘behind the border’ constraints are often not fully captured in the literature on international trade and institutions. The existence of such institutional, socio-economic, and political constraints to Pakistani exports is empirically investigated in this paper through a cross-sectional analysis employing a trade Stochastic Frontier Gravity Model. Aggregate data for 2006-08 and 2009-11 show lower exports in the latter period. This is attributed to demand-suppressing effects emanating from the 2008 global financial crisis and supply-suppressing effects emanating from energy shortfalls and input constraints, due to floods, in Pakistan. The model estimation then demonstrates that behind the border constraints in Pakistan are statistically significant in explaining total exports during 2009-11. The estimation is also presented for four single-digit SIC categories of products for this period. Behind the border constraints are evident for SIC 0 (agriculture, forestry and fish products) and SIC 2 (manufactured products) that combined account for approximately 80 percent of Pakistan’s exports. The estimation results by country further demonstrate that behind the border constraints affect the pattern of trade through the non-realization of bilateral trade potential. In the post-financial crisis era, Pakistan needs to further develop its institutional capacity to promote competitive exports given the explicit and implicit beyond the border trade barriers it faces and work to remove political obstacles to regional trade.

India’s Trade Deficit with China: Will Free Trade Agreement (FTA) Work for India?

Trade between India and China has been rising exponentially with a widening trade deficit for India, which has raised alarm by businesses, and some Indian parliamentarians have started accusing China for unfair trade practices. Nevertheless, both countries intend to negotiate for free trade arrangements between them based on complementarity. This study examines how much reduction in trade deficit due to different preferential trading arrangements is feasible under hypothetical full export potential scenarios using a stochastic frontier gravity model. The empirical analysis shows that India’s potential gain is high when the influence of India’s existing “behind the border” constraints are eliminated.

Stochastic modification of the Schrödinger-Newton equation

The Schr\"odinger-Newton (SN) equation describes the effect of self-gravity on the evolution of a quantum system, and it has been proposed that gravitationally induced decoherence drives the system to one of the stationary solutions of the SN equation. However, the equation itself lacks a decoherence mechanism, because it does not possess any stochastic feature. In the present work we derive a stochastic modification of the Schr\"odinger-Newton equation, starting from the Einstein-Langevin equation in the theory of stochastic semiclassical gravity. We specialize this equation to the case of a single massive point particle, and by using Karolyhazy's phase variance method, we derive the Di\'osi-Penrose criterion for the decoherence time. We obtain a (nonlinear) master equation corresponding to this stochastic SN equation. This equation is, however, linear at the level of the approximation we use to prove decoherence; hence, the no-signaling requirement is met. Lastly, we use physical arguments to obtain expressions for the decoherence length of extended objects.

Probing a gravitational cat state

We investigate the nature of a gravitational two-state system (G2S) in the simplest setup in Newtonian gravity. In a quantum description of matter a single motionless massive particle can in principle be in a superposition state of two spatially separated locations. This superposition state in gravity, or gravitational cat state, would lead to fluctuations in the Newtonian force exerted on a nearby test particle. The central quantity of importance for this inquiry is the energy density correlation. This corresponds to the noise kernel in stochastic gravity theory, evaluated in the weak field nonrelativistic limit. In this limit quantum fluctuations of the stress–energy tensor manifest as the fluctuations of the Newtonian force. We describe the properties of such a G2S system and present two ways of measuring the cat state for the Newtonian force, one by way of a classical probe, the other a quantum harmonic oscillator. Our findings include: (i) mass density fluctuations persist even in single particle systems, and they are of the same order of magnitude as the mean; (ii) a classical probe generically records a non-Markovian fluctuating force; (iii) a quantum probe interacting with the G2S system may undergo Rabi oscillations in a strong coupling regime. This simple prototypical gravitational quantum system could provide a robust testing ground to compare predictions from alternative quantum theories, since the results reported here are based on standard quantum mechanics and classical gravity.

Generation of a Quasi-Biennial Oscillation in an NWP Model Using a Stochastic Gravity Wave Drag Parameterization

Abstract Many operational numerical weather prediction (NWP) systems now extend into the stratosphere and are beginning to be used to generate forecasts beyond conventional 5–10-day periods out to seasonal time scales. Past observational and modeling studies have shown that the quasi-biennial oscillation (QBO) in equatorial stratospheric winds can play an important role in stratosphere–troposphere dynamical coupling over these longer time scales. Consequently, stratosphere-resolving NWP models used to generate seasonal forecasts should contain the necessary physics to generate and maintain the QBO. This study describes several key modifications that were necessary to produce a QBO in a high-altitude NWP model, which include an increase in model vertical resolution, implementation of a computationally efficient stochastic gravity wave drag parameterization, and reductions in the amount of horizontal and vertical diffusion in the stratosphere. Results from a 10-yr free-running model simulation with these modifications show that the westerly QBO phase produces lower temperatures and stronger westerly flow in the Northern Hemisphere (NH) winter polar stratosphere compared to the easterly QBO phase. Ensembles of 120-day simulations over the December–March period show that these modifications replace persistent easterly flow in the equatorial lower stratosphere with a more realistic transition from easterly to westerly flow. The resulting changes in planetary wave propagation produce a statistically significant response in the dynamics of the NH extratropical stratosphere consistent with the Holton–Tan relationship. The westerly shift in equatorial winds also produces a significant response in the NH extratropical troposphere, where the sea level pressure differences in winter resemble the positive phase of the northern annular mode.

Stochastic Gravity Model and Trade Efficiency for lndonesia

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Noise kernels of stochastic gravity in conformally-flat spacetimes

The central object in the theory of semiclassical stochastic gravity is the noise kernel, which is the symmetric two point correlation function of the stress–energy tensor. Using the corresponding Wightman functions in Minkowski, Einstein and open Einstein spaces, we construct the noise kernels of a conformally coupled scalar field in these spacetimes. From them we show that the noise kernels in conformally-flat spacetimes, including the Friedmann–Robertson–Walker universes, can be obtained in closed analytic forms by using a combination of conformal and coordinate transformations.

Can South–South Trade Agreements Reduce Development Deficits?

With the rise of India and other Southern engines of growth, the South Asian Association for Regional Cooperation (SAARC) and similar vehicles for South–South regional cooperation have gained in importance. Developing a stochastic frontier gravity model, this article investigates the presence of significant ‘behind the border’ and ‘beyond the border’ constraints and analyzes the potential synergy between trade and development goals in the context of SAARC. In particular, the article demonstrates: (a) a considerable potential for improvement of trade complementarities among SAARC members; (b) a long-run scope for gains from trade; (c) country-specific ‘socio-political–economical–institutional’ rigidities form ‘behind the border’ constraints to trade; (d) that realization of trade potential would eliminate development deficits via growth dividends through trade and investment spillovers, exchange of skills and knowledge; and (e) since tariffs are not an important barrier in this region, emphasis should be placed on higher technology cooperation, and cooperation in areas of education, literacy, gender, institutions ensuring good governance, social capital and infrastructure, to help achieve the SAARC Development Goals (SDGs). The main policy insights are that the removal of ‘behind the border’ barriers and policy coordination would reduce ‘productivity lags’ and close the ‘gap’.

Do South-South Trade Agreements Enhance Member Countriess Trade? Evaluating Implications for Development Potentials in the Context of SAARC

The South Asian Association for Regional Cooperation (SAARC) is the least integrated economy in the Asia-Pacific region, whose intraregional trade was only 5.6 per cent in 2006. In order to estimate potential trade of the SAARC Member Countries (SMCs), we have estimated “behind the border” and “beyond the border” constraints, which both appear to be quite significant in all SMCs. Given the level of “beyond the border” constraints, in the absence of full information on all “behind the border” constraints, the combined effect of the latter on actual exports of individual SAARC country is modeled in the gravity equation, which is estimated using the methods suggested in the literature for estimating stochastic frontier production function. Results of the stochastic frontier gravity model show that when FTA among SAARC countries becomes fully operational, smaller members will gain maximum benefits compared to larger members. The paper also analyses the synergy between trade and development goals of the SAARC countries. Since tariffs are not an important barrier in this region, emphasis should be given to liberalization of investment flows, higher technology cooperation, and cooperation in areas of education, literacy, basic health care, gender bias, favorable institutions ensuring good governance, social capital, transparency, transportation costs, infrastructure, to achieve the SAARC development goals (SDGs).

Australia's export potential: an exploratory analysis

A country's inability to export to its potential is a reflection of institutional and infrastructural impediments and rigidities that exist at home as well as in its trading partners. Distinguishing these rigidities as ‘behind the border’ factors and ‘beyond the border’ factors, respectively, this paper examines the impact of ‘behind the border’ factors on Australia's export potential. The hypothesis tested in this paper is that the ‘behind the border’ factors are important in almost all exporting countries and exert negative effects on export potential of the countries. Australia, which is relatively open among the resource-based developed economies, is chosen for testing the hypothesis by estimating a stochastic frontier gravity model using bilateral data from 2006 to 2008 on trade with its key trading partners. The empirical analysis indicates that even in the case of Australia, which is a developed country, ‘behind the border’ factors are important in explaining the reasons for its failure to export to its full potential.

To be or not to be: dilemma of Africa's economic engagement with China and other emerging economies

In this study an attempt to examine the China−Africa trade potential and the implications of exploiting that potential is made. The potential is examined using the Trade Complementarity Index and the stochastic frontier gravity model of trade. The results suggest that there is considerable potential to expand China−Africa trade. Apart from reforming trade policies, removing other behind-the-border socio-political-institutional constraints and improving trade facilitation would contribute to realization of this potential. However, the realization of this potential may entail locking African countries in primary commodity sectors (and hence de-industrialization). A non-parametric test using the ‘Galtonian regression method’ as well as a multi-country version of the Heckscher−Ohlin−Vanek trade model is employed to test this pattern. The results suggest that African countries are characterized by re-deepening specialization in the primary commodity exports sector owing to China's commodity demand surge. We also found that the indirect impacts of this demand surge are more significant. This calls for strategic policy engagement with China, India and other emerging economies such as Brazil with the aim of balancing between the temporary resource windfall gain and the future industrialization and development of the continent.