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Trade Potential Revisited: A Panel Data Analysis For Zimbabwe

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  • Enrique Martínez-Galán
  • Isabel Proença
  • Maria Paula Fontoura

Abstract

This paper notes that previous results on trade potential based on a panel data set may be biased and proposes the adequate Poisson Pseudo Maximum Likelihood method to estimate trade potential based on the elasticity estimates generated by a gravity model, with conclusions on trade potential based on confidence intervals estimated with the Delta method. This approach had not been yet considered in the literature for panel data. This methodology is used to evaluate Zimbabwe export potential in a period characterized by strong restrictions on trade, based on the elasticity estimates generated by an augmented gravity model for six Southern African Development Community member countries and their exports to the rest of the world. Results show that Zimbabwe has a large unexploited trade potential which will not be realized without political stability and structural reforms. For comparison purposes, we also present the gravity coefficients calculated with other estimation methods.

Suggested Citation

  • Enrique Martínez-Galán & Isabel Proença & Maria Paula Fontoura, 2015. "Trade Potential Revisited: A Panel Data Analysis For Zimbabwe," Working Papers Department of Economics 2015/14, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp142015
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    References listed on IDEAS

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    1. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, October.
    2. Hamilton, C.B. & Winters, L.A., 1992. "Opening Up International Trade in Eastern Europe," Papers 511, Stockholm - International Economic Studies.
    3. Fritz Breuss & Peter Egger, 1999. "How Reliable Are Estimations of East-West Trade Potentials Based on Cross-Section Gravity Analyses?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(2), pages 81-94, June.
    4. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    5. Isabel Proença & Stefan Sperlich & Duygu Savaşcı, 2015. "Semi-mixed effects gravity models for bilateral trade," Empirical Economics, Springer, vol. 48(1), pages 361-387, February.
    6. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    7. Gros, Daniel & Gonciarz, Andrzej, 1996. "A note on the trade potential of Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 12(4), pages 709-721, December.
    8. Isabel Proença & Maria Fontoura & Enrique Martínez-Galán, 2008. "Trade in the enlarged European Union: a new approach on trade potential," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 7(3), pages 205-224, December.
    9. Wang, Zhen Kun & Winters, L. Alan, 1991. "The Trading Potential of Eastern Europe," CEPR Discussion Papers 610, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Nuno Carlos Leitão, 2023. "The Impact of Geopolitical Risk on Portuguese Exports," Economies, MDPI, vol. 11(12), pages 1-17, November.

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    More about this item

    Keywords

    fiscal sustainability; causality; impulse response functions; time-varying coefficients; fiscal rules; logistic model;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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