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Trade Between Euro Zone and Arab Countries: a Panel Study

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Author Info
Harb, Nasri

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Abstract

We construct an aggregate data panel to estimate price and income elasticities of the Arab countries imports from and exports to euro zone. We study the non-stationarity of our series and verify the cointegration hypothesis among the variables using Pedroni's heterogeneous panel cointegration tests (2004). The panel data circumvent the problem of short span sample and increase the power of the non stationarity tests. Then, we estimate the idiosyncratic and panel cointegrating vectors using DOLS (Kao and Chiang, 2000), FMOLS (Phillips and Hansen, 1990) and group-mean DOLS and FMOLS developed by Pedroni (2000, 2001). Our variables are shown to be cointegrated. Arab imports from Euro zone countries are income inelastic, but price elastic. Results of export function are not conclusive and depend on the used estimator.

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File URL: http://mpra.ub.uni-muenchen.de/13675/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13675.

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Date of creation: Mar 2006
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Publication status: Published in Applied Economics 16.39(2007): pp. 2099-2107
Handle: RePEc:pra:mprapa:13675

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Related research
Keywords: Imports; Exports; Time series; Panel Cointegration; DOLS; FMOLS.;

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Find related papers by JEL classification:
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
F30 - International Economics - - International Finance - - - General
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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  1. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Cowles Foundation Discussion Papers 1222, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  2. Harb, Nasri & Al-Awad, Mouawiya, 2005. "Financial Development and Economic Growth in the Middle East," MPRA Paper 13605, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, 2004. "Some cautions on the use of panel methods for integrated series of macroeconomic data," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 322-340, December. [Downloadable!] (restricted)
    Other versions:
  4. Nasri Harb, 2004. "Money demand function: a heterogeneous panel application," Applied Economics Letters, Taylor and Francis Journals, vol. 11(9), pages 551-555, January. [Downloadable!] (restricted)
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  5. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)
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  6. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June. [Downloadable!]
  7. Andrew Levin & Chien-Fu Lin, 1993. "Unit Root Tests in Panel Data: New Results," University of California at San Diego, Economics Working Paper Series 93-56, Department of Economics, UC San Diego. [Downloadable!]
  8. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
  9. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I. [Downloadable!] (restricted)
  10. Alkhatib Alkswani, Mamdouh & Al-Towaijari, Hamad A., 1999. "Cointegration, Error Correction and the Demand for Money in Saudi Arabia," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 52(3), pages 299-308.
  11. Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, 2005. "Testing for PPP: Should we use panel methods?," Empirical Economics, Springer, vol. 30(1), pages 77-91, January. [Downloadable!] (restricted)
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  12. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November. [Downloadable!] (restricted)
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