Advanced Search
MyIDEAS: Login to save this article or follow this journal

Evaluating China’s Integration in World Trade with a Gravity Model Based Benchmark

Contents:

Author Info

  • Matthieu Bussière

    ()

  • Bernd Schnatz

Abstract

The rapid transition of China from a closed agricultural society to an industrial powerhouse has been associated with a rapid increase in the share of China in world trade. As the world is taking the full measure of this phenomenon, tensions have been arising ranging from holding China partly responsible for global imbalances to complaints about the “excessive” competitiveness of Chinese products. Without a quantifiable benchmark, however, such claims are difficult to judge. This paper therefore provides an assessment of China’s “natural” place in the world economy based on a new set of trade integration indicators. These indicators are used as a benchmark in order to examine whether China’s share in international trade is consistent with fundamentals such as economic size, location and other relevant factors. They constitute a better measure of trade integration that incorporates many more factors than traditional openness ratios. Results show that the model tracks international trade well and confirm that China is already well integrated in world markets, particularly with North America, several Latin American and East Asian emerging markets and most euro area countries. JEL Classification: C23, F15, F14

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1007/s11079-007-9061-5
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 20 (2009)
Issue (Month): 1 (February)
Pages: 85-111

as in new window
Handle: RePEc:kap:openec:v:20:y:2009:i:1:p:85-111

Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: Gravity model; Panel data; Trade; China; C23; F15; F14;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
  2. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  3. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2005. "Trade Integration of Central and Eastern European Countries: Lessons from a Gravity Model," Working Papers 105, Oesterreichische Nationalbank (Austrian Central Bank).
  4. Alejandro Micco & Ernesto H. Stein & Guillermo Luis Ordoñez, 2003. "The Currency Union Effect on Trade: Early Evidence from EMU," IDB Publications 6511, Inter-American Development Bank.
  5. Filip Abraham & Jan Van Hove, 2005. "The Rise of China: Prospects of Regional Trade Policy," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(3), pages 486-509, October.
  6. Peter Egger, . "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO.
  7. Tamim Bayoumi & Barry Eichengreen, 1995. "Is Regionalism Simply a Diversion? Evidence From the Evolution of the EC and EFTA," NBER Working Papers 5283, National Bureau of Economic Research, Inc.
  8. Yongzheng Yang, 2003. "China'S Integration Into the World Economy," IMF Working Papers 03/245, International Monetary Fund.
  9. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  10. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  11. Jan Fidrmuc & Jarko Fidrmuc, 2003. "Disintegration and Trade," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 811-829, November.
  12. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  13. Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers.
  14. Baldwin, Richard & Taglioni, Daria, 2006. "Gravity for Dummies and Dummies for Gravity Equations," CEPR Discussion Papers 5850, C.E.P.R. Discussion Papers.
  15. Filippini, Carlo & Molini, Vasco, 2003. "The determinants of East Asian trade flows: a gravity equation approach," Journal of Asian Economics, Elsevier, vol. 14(5), pages 695-711, October.
  16. Warwick J. McKibbin & Wing Thye Woo, 2003. "The Consequences of China's WTO Accession for Its Neighbors," Asian Economic Papers, MIT Press, vol. 2(2), pages 1-38.
  17. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
  18. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc.
  19. Robert Holzmann & Christian Thimann & Angela Petz, 1994. "Pressure to Adjust: Consequences for the OECD Countries from Reforms in Eastern Europe," International Trade 9403001, EconWPA.
  20. Chang, Gene Hsin & Shao, Qin, 2004. "How much is the Chinese currency undervalued? A quantitative estimation," China Economic Review, Elsevier, vol. 15(3), pages 366-371.
  21. Robert Anderton & Filippo di Mauro & Fabio Moneta, 2004. "Understanding the impact of the external dimension on the euro area - trade, capital flows and other international macroeconomic linkages," Occasional Paper Series 12, European Central Bank.
  22. Wang, Jiao & Ji, Andy G., 2006. "Exchange rate sensitivity of China’s bilateral trade flows," BOFIT Discussion Papers 19/2006, Bank of Finland, Institute for Economies in Transition.
  23. Hamid Faruqee, 2004. "Measuring the Trade Effects of EMU," IMF Working Papers 04/154, International Monetary Fund.
  24. repec:fth:michin:382 is not listed on IDEAS
  25. Agnès Bénassy-Quéré & Amina Lahrèche-Revil, 2003. "Trade Linkages and Exchange Rates in Asia: The Role of China," Working Papers 2003-21, CEPII research center.
  26. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
  27. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  28. Lee Branstetter & Nicholas Lardy, 2006. "China's Embrace of Globalization," NBER Working Papers 12373, National Bureau of Economic Research, Inc.
  29. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
  30. Peter Egger & Michael Pfaffermayr, 2001. "Distance, Trade and FDI: A Hausman-Taylor SUR Approach," WIFO Working Papers 164, WIFO.
  31. Eswar Prasad, 2004. "China's Growth and Integration into the World Economy," IMF Occasional Papers 232, International Monetary Fund.
  32. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  33. Babetskaia-Kukharchuk, Oxana & Maurel, Mathilde, 2004. "Russia's accession to the WTO: the potential for trade increase," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 680-699, December.
  34. Yongcheol Shin & Laura Serlenga, 2004. "Gravity Models of the Intra-EU Trade: Application of the Hausman-Taylor Estimation in Heterogeneous Panels with Common Time-specific Factors," Econometric Society 2004 Far Eastern Meetings 671, Econometric Society.
  35. Sweta Chaman Saxena & Valerie Cerra, 2002. "An Empirical Analysis of China's Export Behavior," IMF Working Papers 02/200, International Monetary Fund.
  36. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
  37. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  38. Peter Egger, 2004. "Estimating regional trading bloc effects with panel data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(1), pages 151-166, March.
  39. John W. Schindler & Dustin H. Beckett, 2005. "Adjusting Chinese bilateral trade data: how big is China's trade surplus," International Finance Discussion Papers 831, Board of Governors of the Federal Reserve System (U.S.).
  40. Jong-Wha Lee & Innwon Park, 2005. "Free Trade Areas in East Asia: Discriminatory or Non-discriminatory?," The World Economy, Wiley Blackwell, vol. 28(1), pages 21-48, 01.
  41. Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. A Salim, Ruhu & Mahfuz Kabir, Mohammad, 2011. "Does More Trade Potential Remain in Arab States of the Gulf ?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 217-243.
  2. Balogun, Emmanuel Dele, 2007. "Exchange rate policy and export performance of WAMZ countries," MPRA Paper 6233, University Library of Munich, Germany.
  3. Goh, Soo Khoon & Wong, Koi Nyen & Tham, Siew Yean, 2012. "Does Outward FDI Matter in International Trade? Evidence from Malaysia," MPRA Paper 39715, University Library of Munich, Germany.
  4. Ivan Roberts & Anthony Rush, 2010. "Sources of Chinese Demand for Resource Commodities," RBA Research Discussion Papers rdp2010-08, Reserve Bank of Australia.
  5. Estrella Gómez Herrera, 2010. "Comparing alternative methods to estimate gravity models of bilateral trade," ThE Papers 10/05, Department of Economic Theory and Economic History of the University of Granada..
  6. Lars Boerner & Oliver Volckart, 2010. "The utility of a common coinage: currency unions and the integration of money markets in late medieval Central Europe," Economic History Working Papers 29409, London School of Economics and Political Science, Department of Economic History.
  7. Goh, Soo Khoon & Wong, Koi Nyen & Tham, Siew Yean, 2013. "Trade linkages of inward and outward FDI: Evidence from Malaysia," Economic Modelling, Elsevier, vol. 35(C), pages 224-230.
  8. Richard G. Harris & Peter E. Robertson & Jessica Y. Xu, 2010. "The International Effects of China's Growth, Trade and Ecucation Booms," Economics Discussion / Working Papers 10-04, The University of Western Australia, Department of Economics.
  9. Christian Dreger & Yanqun Zhang, 2011. "The Chinese Impact on GDP Growth and Inflation in the Industrial Countries," Discussion Papers of DIW Berlin 1151, DIW Berlin, German Institute for Economic Research.
  10. Nazia Gul & Hafiz M. Yasin, 2011. "The Trade Potential of Pakistan: An Application of the Gravity Model," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(1), pages 23-62, Jan-Jun.
  11. Roberts, Ivan & Rush, Anthony, 2012. "Understanding China's demand for resource imports," China Economic Review, Elsevier, vol. 23(3), pages 566-579.
  12. Rudiger Ahrend & Cyrille Schwellnus, 2012. "Do investors disproportionately shed assets of distant countries during global financial crises?: The role of increased uncertainty," OECD Journal: Economic Studies, OECD Publishing, vol. 2012(1), pages 1-20.
  13. Geldi, Hatice Kerra, 2012. "Trade effects of regional integration: A panel cointegration analysis," Economic Modelling, Elsevier, vol. 29(5), pages 1566-1570.
  14. Balasan, Andrei-Cristian, 2012. "Literature review concerning the relationship between globalization and regionalization in the world economy," MPRA Paper 39746, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:20:y:2009:i:1:p:85-111. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.