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Measuring Trade and Trade Potential: A Survey

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  • Shiro Armstrong

Abstract

This paper provides a survey and a brief critical review of the literature on the widely used gravity models of trade, as a prelude to the justification of its use with the stochastic frontier methodology. The important papers on the theoretical foundations of the gravity model are reviewed and related to papers applied to explain determinants of trade flows. Then some shortcomings of the gravity model are discussed. The paper introduces the stochastic frontier gravity model as a way of estimating trade resistances and overcoming some of the shortcomings of conventional gravity models in their use for that purpose.

Suggested Citation

  • Shiro Armstrong, 2007. "Measuring Trade and Trade Potential: A Survey," Asia Pacific Economic Papers 368, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:csg:ajrcau:368
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    File URL: https://crawford.anu.edu.au/pdf/pep/apep-368.pdf
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    References listed on IDEAS

    as
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    JEL classification:

    • F10 - International Economics - - Trade - - - General

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