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Searching for the Appropriate Measure of Multilateral Trade-Resistance Terms in the Gravity Model of Bilateral Trade Flows

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  • Natalia Drzewoszewska

    (Nicolaus Copernicus University)

Abstract

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.

Suggested Citation

  • Natalia Drzewoszewska, 2014. "Searching for the Appropriate Measure of Multilateral Trade-Resistance Terms in the Gravity Model of Bilateral Trade Flows," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 14, pages 29-49.
    • Handle: RePEc:cpn:umkdem:v:14:y:2014:p:29-49
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    More about this item

    Keywords

    international trade; panel data; gravity model; multilateral trade-resistance terms; bilateral trade costs; globalization in the XXI century; Euro'˜s effect;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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