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Regional integration and trade: A panel cointegration approach to estimating the gravity model

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Author Info

  • Marie Stack
  • Eric Pentecost

Abstract

Using a panel data set of bilateral export flows from 12 European Union (EU) countries to 20 Organisation for Economic Co-operation and Development (OECD) trading partners over the period 1992-2003, a panel cointegration approach to estimating the gravity model is adopted to test for the significance of European regional integration. A comparison of the results indicates that a positive and significant coefficient estimate of the EU dummy variable is found for both the pooled ordinary least squares (POLS) estimator and the dynamic ordinary least squares (DOLS) estimator. The results, however, diverge once fixed effects are admitted into the model. The least squares dummy variable (LSDV) estimator suggests a small positive effect of EU integration on trade. In contrast, the dynamic LSDV estimator indicates that regional integration has a larger beneficial effect on trade. The results highlight the fundamental importance of properly accounting for endogeneity when evaluating trade policy effects.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09638199.2011.538184
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 20 (2011)
Issue (Month): 1 ()
Pages: 53-65

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Handle: RePEc:taf:jitecd:v:20:y:2011:i:1:p:53-65

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Web page: http://www.tandfonline.com/RJTE20

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Related research

Keywords: bilateral export flows; EU accession; non-stationary panel data;

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Cited by:
  1. Petra Bubáková, 2013. "Gravity Model of International Trade, Its Variables, Assumptions, Problems and Applications," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2013(2), pages 3-24.
  2. Suresh K G & Neeraj Aswal, 2014. "Determinants of India’s Manufactured Exports to South and North: A Gravity Model Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 144-151.

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