On the Geographical Determinants of Bilateral Trade: ANFIS Approach

This study examines the geographical determinants of bilateral trade by comparing the OLS method and ANFIS structure. Using over 150K observations for 106 countries for the years between 1995 and 2010, estimations from both methods consistently imply that the basic determinants of bilateral trade are very much similar. We compare the reliability of our estimation results from both analyses using three different criteria, namely the coefficient of determination, root mean squared error, and mean absolute error values. These comparisons clearly confirm that the geographical determinants of bilateral trade can be evaluated much more effectively by the help of the fuzzy logic framework of ANFIS than the traditional econometric methods commonly used in the literature. As a robustness check, we also generate FIS for each individual year and apply it to pooled sample, which also enables us to set up a better performing and practical tool.