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Pooled Mean Group Estimation of the Bilateral Trade Balance Equation: USA vis-a-vis her Trading Partners

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  • Gour Gobinda Goswami
  • Sadaquat Junayed

Abstract

The autoregressive distributed lag model (ARDL), even though it distinguishes between the short run and the long run effect, allows both the intercepts and slopes to vary across countries. Static panel estimations, such as fixed-effects estimation (FE), cannot distinguish between the short run and the long run behavior. To address the issue of short run heterogeneity as well as long run homogeneity of the estimated coefficients in a panel framework, the pooled mean group (PMG) estimator has gained popularity since 1999. In this paper, we estimate the bilateral trade balance model for the USA vis-a-vis her 19 OECD trading partners for the period 1973q1-2004q4 using the PMG estimator and find that PMG performs better than ARDL, FE, and MG estimators and provides significant and theoretically consistent results.

Suggested Citation

  • Gour Gobinda Goswami & Sadaquat Junayed, 2006. "Pooled Mean Group Estimation of the Bilateral Trade Balance Equation: USA vis-a-vis her Trading Partners," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(4), pages 515-526.
  • Handle: RePEc:taf:irapec:v:20:y:2006:i:4:p:515-526
    DOI: 10.1080/02692170600874218
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    References listed on IDEAS

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    Cited by:

    1. Prema-chandra Athukorala & Fahad Hassan Khan, 2014. "Global production sharing and the measurement of price elasticities in international trade," Departmental Working Papers 2014-22, The Australian National University, Arndt-Corden Department of Economics.
    2. repec:eco:journ2:2017-03-42 is not listed on IDEAS
    3. Iwata, Hiroki & Okada, Keisuke & Samreth, Sovannroeun, 2011. "A note on the environmental Kuznets curve for CO2: A pooled mean group approach," Applied Energy, Elsevier, vol. 88(5), pages 1986-1996, May.

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