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Gravity Equation and Trade Agreements: A Different Econometric Approach

Author

Listed:
  • María Luisa Recalde
  • Luis Marcelo Florensa
  • Iván Iturralde

    (Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas (Córdoba, Argentina))

Abstract

This paper is aimed at multiplicatively estimating the parameters of the gravity equation by using the Poisson Pseudo-Maximum-Likelihood (PPML) estimator, and taking heteroskedasticity into account at the same time. Besides, in order to compare the results, the model will be estimated trough OLS and Tobit, and the precision of the different estimators will be assessed by a set of specification tests. Results indicate that the effects of Preferential Trade Agreements are very sensitive to the method chosen to estimate the gravity model and the results obtained under PPML are the most reliable.

Suggested Citation

  • María Luisa Recalde & Luis Marcelo Florensa & Iván Iturralde, 2008. "Gravity Equation and Trade Agreements: A Different Econometric Approach," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 46(2), pages 83-104, Diciembre.
    • Handle: RePEc:ief:reveye:v:46:y:2008:i:2:p:83-104
    DOI: 10.55444/2451.7321.2008.v46.n2.3853
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    References listed on IDEAS

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    More about this item

    Keywords

    Preferential trade agreements; gravity model; trade creation and trade diversion; generalized lineal models;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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