IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v8y2020i1p9-d314464.html
   My bibliography  Save this article

The Impact of Thailand’s Openness on Bilateral Trade between Thailand and Japan: Copula-Based Markov Switching Seemingly Unrelated Regression Model

Author

Listed:
  • Pathairat Pastpipatkul

    (Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand
    Center of Excellence in Econometrics, Faculty of Economics, Chiang Mai 50200, Thailand)

  • Petchaluck Boonyakunakorn

    (Faculty of Agriculture, Chiang Mai University, Chiang Mai 50200, Thailand)

  • Kanyaphon Phetsakda

    (Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand)

Abstract

The purpose of this paper is to analyze the impact of trade openness and the factors based on the gravity model on the bilateral trade flows between Thailand and Japan. The factors consist of GDP, distance, trade openness, and exchange rate. Bilateral trade is composed of two flows: Thailand’s export flow to Japan, and Thailand’s import flow from Japan. The specified gravity equations are estimated by Copula-based Markov switching seemingly unrelated regression approach. The best-fitting model is chosen based on the lowest Akaike information criterion (AIC) and Bayesian information criterion (BIC). The Normal and Student’s t distributions are for Thailand’s export equation and Thailand’s import equation, respectively. The Student’s t copula is applied for joint distribution. Analyzing the bilateral trade flow is separated into two situations, namely the high and the low growth markets. Empirical results show that distance provides a positive effect on the export in a high growth regime, but a negative impact on the export in a low growth regime. As for Thailand’s import flow, all variables, but especially trade openness, provide strong evidence supporting significance for both regimes. For the GDPs of both Thailand and Japan, trade openness and the exchange rate increase import flow in a high growth market. Meanwhile, the exchange rate decreases import flow in a low growth market. The Markov Switching Probability Estimation notes that Thailand’s trading with Japan is mostly in the fast-growing market.

Suggested Citation

  • Pathairat Pastpipatkul & Petchaluck Boonyakunakorn & Kanyaphon Phetsakda, 2020. "The Impact of Thailand’s Openness on Bilateral Trade between Thailand and Japan: Copula-Based Markov Switching Seemingly Unrelated Regression Model," Economies, MDPI, vol. 8(1), pages 1-13, January.
    • Handle: RePEc:gam:jecomi:v:8:y:2020:i:1:p:9-:d:314464
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/8/1/9/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7099/8/1/9/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Greenaway & David Sapsford, 1994. "What does liberalisation do for exports and growth?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(1), pages 152-174, March.
    2. Ahmad A. Al-Majali & Radi M. Adayleh, 2018. "International Competitiveness in Services in Some Middle East and North Africa Countries Using Gravity Model," International Review of Management and Marketing, Econjournals, vol. 8(2), pages 53-62.
    3. Donny Tang, 2005. "Effects of the Regional Trading Arrangements on Trade: Evidence from the NAFTA, ANZCER and ASEAN Countries, 1989 - 2000," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(2), pages 241-265.
    4. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
    5. repec:cup:cbooks:9781107036727 is not listed on IDEAS
    6. Simwaka, Kisu, 2006. "Dynamics of Malawi’s trade flows: a gravity model approach," MPRA Paper 1122, University Library of Munich, Germany.
    7. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    8. Ronald L. Wasserstein & Nicole A. Lazar, 2016. "The ASA's Statement on p -Values: Context, Process, and Purpose," The American Statistician, Taylor & Francis Journals, vol. 70(2), pages 129-133, May.
    9. Rhys Jenkins, 1996. "Trade Liberalization and Export Performance in Bolivia," Development and Change, International Institute of Social Studies, vol. 27(4), pages 693-716, October.
    10. Mckenzie, Michael D., 1998. "The impact of exchange rate volatility on Australian trade flows," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(1), pages 21-38, January.
    11. Zellner, Arnold & Ando, Tomohiro, 2010. "A direct Monte Carlo approach for Bayesian analysis of the seemingly unrelated regression model," Journal of Econometrics, Elsevier, vol. 159(1), pages 33-45, November.
    12. Hooper, Peter & Kohlhagen, Steven W., 1978. "The effect of exchange rate uncertainty on the prices and volume of international trade," Journal of International Economics, Elsevier, vol. 8(4), pages 483-511, November.
    13. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March.
    14. Sellke T. & Bayarri M. J. & Berger J. O., 2001. "Calibration of rho Values for Testing Precise Null Hypotheses," The American Statistician, American Statistical Association, vol. 55, pages 62-71, February.
    15. Barry Eichengreen & Douglas A. Irwin, 1998. "The Role of History in Bilateral Trade Flows," NBER Chapters, in: The Regionalization of the World Economy, pages 33-62, National Bureau of Economic Research, Inc.
    16. Leonhard Held & Manuela Ott, 2016. "How the Maximal Evidence of -Values Against Point Null Hypotheses Depends on Sample Size," The American Statistician, Taylor & Francis Journals, vol. 70(4), pages 335-341, October.
    17. Alesina, Alberto & Spolaore, Enrico & Wacziarg, Romain, 2005. "Trade, Growth and the Size of Countries," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 23, pages 1499-1542, Elsevier.
    18. Kaliappa Kalirajan, 2008. "Gravity model specification and estimation: revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 15(13), pages 1037-1039.
    19. Joshi, Vijay & Little, I. M. D, 1996. "India's Economic Reforms, 1991-2001," OUP Catalogue, Oxford University Press, number 9780198290780.
    20. Bhagwati, Jagdish N, 1988. "Export-Promoting Trade Strategy: Issues and Evidence," The World Bank Research Observer, World Bank, vol. 3(1), pages 27-57, January.
    21. Anders Hammer Strømman & Faye Duchin, 2006. "A world trade model with bilateral trade based on comparative advantage," Economic Systems Research, Taylor & Francis Journals, vol. 18(3), pages 281-297.
    22. repec:cup:cbooks:9781107654167 is not listed on IDEAS
    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


    Cited by:

    1. Richard Apau & Peter Moores-Pitt & Paul-Francois Muzindutsi, 2021. "Regime-Switching Determinants of Mutual Fund Performance in South Africa," Economies, MDPI, vol. 9(4), pages 1-20, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mauricio Vaz Lobo Bittencourt & Paula Andrea Mosquera Agudelo, 2021. "The impacts of the exchange rate volatility on colombian trade with its main trade partners," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 18(2), pages 57-81, Julio-Dic.
    2. Maria Cipollina & Luca Salvatici, 2010. "Reciprocal Trade Agreements in Gravity Models: A Meta‐Analysis," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 63-80, February.
    3. Anderson, James E. & Yotov, Yoto V., 2020. "Short run gravity," Journal of International Economics, Elsevier, vol. 126(C).
    4. Disdier, Anne-Celia & Mayer, Thierry, 2007. "Je t'aime, moi non plus: Bilateral opinions and international trade," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1140-1159, December.
    5. Povilas Lastauskas & Mariarosaria Comunale & Justas Dainauskas, 2021. "What Explains Excess Trade Persistence? A Theory of Habits in the Supply Chains," Bank of Lithuania Working Paper Series 85, Bank of Lithuania.
    6. Keith Head & Thierry Mayer, 2013. "Innis Lecture: What separates us? Sources of resistance to globalization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(4), pages 1196-1231, November.
    7. Keith Head & Thierry Mayer, 2013. "What separates us? Sources of resistance to globalization," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1196-1231, November.
    8. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    9. Hosein, Roger & Satnarine-Singh, Nirvana & Saridakis, George, 2022. "The Spillover Effect of Exports: An Analysis of Caribbean SIDs," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 75(1), pages 1-28.
    10. Melitz, Jacques, 2007. "North, South and distance in the gravity model," European Economic Review, Elsevier, vol. 51(4), pages 971-991, May.
    11. Jan Möhlmann & Sjef Ederveen & Henri L.F. de Groot & Gert-Jan M. Linders, 2009. "Intangible Barriers to International Trade: A Sectoral Approach," Tinbergen Institute Discussion Papers 09-021/3, Tinbergen Institute.
    12. Dreyer, H., 2013. "Was erklärt den Außenhandel der deutschen Agrar- und Ernährungswirtschaft? Eine ökonometrische Analyse auf Basis des Gravitationsmodells," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 48, March.
    13. Tenreyro, Silvana, 2007. "On the trade impact of nominal exchange rate volatility," Journal of Development Economics, Elsevier, vol. 82(2), pages 485-508, March.
    14. Erick Kitenge & Sajal Lahiri, 2022. "Is the Internet bringing down language‐based barriers to international trade?," Review of International Economics, Wiley Blackwell, vol. 30(2), pages 566-605, May.
    15. Shiro Patrick Armstrong, 2015. "East and South Asia: Managing Difficult Bilateral Relations and Regional Integration Globally," Asian Economic Journal, East Asian Economic Association, vol. 29(4), pages 303-324, December.
    16. Martijn Burger & Frank van Oort & Gert-Jan Linders, 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-inflated Estimation," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(2), pages 167-190.
    17. repec:hal:spmain:info:hdl:2441/10183 is not listed on IDEAS
    18. Vandenbussche, Hylke & Zanardi, Maurizio, 2010. "The chilling trade effects of antidumping proliferation," European Economic Review, Elsevier, vol. 54(6), pages 760-777, August.
    19. Yuan, Yan & Awokuse, Titus O., 2003. "Exchange Rate Volatility And U.S. Poultry Exports: Evidence From Panel Data," 2003 Annual meeting, July 27-30, Montreal, Canada 22083, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Soumyananda Dinda, 2014. "Climate Change: An Emerging Trade Opportunity in South Asia," South Asian Journal of Macroeconomics and Public Finance, , vol. 3(2), pages 221-239, December.
    21. Petrit Gashi & Mehtap Hisarciklilar & Geoffrey Pugh, 2017. "Kosovo – EU trade relations: a dynamic panel poisson approach," Applied Economics, Taylor & Francis Journals, vol. 49(27), pages 2642-2654, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:8:y:2020:i:1:p:9-:d:314464. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.