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Gravity-model Estimation with Time-interval Data: Revisiting the Impact of Free Trade Agreements

Author

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  • Egger, Peter

    (EggerDepartment of Management, Technology and Economics, KOF Swiss Economic Institute)

  • Larch, Mario

    (University of Bayreuth)

  • Yotov, Yoto

    (School of Economics Drexel University LeBow College of Business)

Abstract

We challenge the common practice of estimating gravity equations with time-interval data in order to capture dynamic-adjustment effects to trade-policy changes. Instead, we point to a series of advantages of using consecutive-year data recognizing dynamic-adjustment effects. Our analysis reveals that, relative to time-interval data, the proposed approach avoids downward-biased effect estimates due to the distribution of trade-policy events during an event window as well as due to anticipation (pre-interval) and delayed (post-interval) effects, and it improves the efficiency of effect estimates due to the use of more data.

Suggested Citation

  • Egger, Peter & Larch, Mario & Yotov, Yoto, 2020. "Gravity-model Estimation with Time-interval Data: Revisiting the Impact of Free Trade Agreements," School of Economics Working Paper Series 2020-11, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2020_011
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    References listed on IDEAS

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    Cited by:

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    2. Swati Dhingra & Rebecca Freeman & Hanwei Huang, 2023. "The Impact of Non‐tariff Barriers on Trade and Welfare," Economica, London School of Economics and Political Science, vol. 90(357), pages 140-177, January.
    3. Byungyul Park & John Beghin, 2023. "Exploring the impact of economic integration agreements through extreme bounds analysis," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 35-59, February.
    4. Julia Grübler & Oliver Reiter & Robert Stehrer, 2021. "On the new gold standard in EU trade integration: reviewing the EU-Japan EPA," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(3), pages 611-644, August.
    5. Mulabdic, Alen & Rotunno, Lorenzo, 2022. "Trade barriers in government procurement," European Economic Review, Elsevier, vol. 148(C).
    6. Harald Oberhofer & Michael Pfaffermayr & Yvonne Wolfmayr, 2021. "Die Auswirkungen des Brexit auf Österreichs Wirtschaft," WIFO Studies, WIFO, number 66782.
    7. Ingo Borchert & Mario Larch & Serge Shikher & Yoto V. Yotov, 2022. "Disaggregated gravity: Benchmark estimates and stylized facts from a new database," Review of International Economics, Wiley Blackwell, vol. 30(1), pages 113-136, February.
    8. Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero & Jordi Paniagua, 2021. "Has the Euro paid off? A study of the trade-induced welfare effects of the EMU," Working Papers 2103, Department of Applied Economics II, Universidad de Valencia.
    9. Ovielt Baltodano L'opez & Roberto Casarin, 2022. "A Dynamic Stochastic Block Model for Multi-Layer Networks," Papers 2209.09354, arXiv.org.
    10. Dursun, Gökhan, 2023. "The impact of the customs union on the EU – Turkey trade," International Economics, Elsevier, vol. 173(C), pages 143-163.
    11. Freeman, Rebecca & Lewis, John, 2021. "Gravity model estimates of the spatial determinants of trade, migration, and trade-and-migration policies," Economics Letters, Elsevier, vol. 204(C).
    12. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.
    13. Yvonne Wolfmayr & Michael Pfaffermayr, 2022. "The EU Services Directive: Untapped Potentials of Trade in Services," WIFO Studies, WIFO, number 69628.
    14. David J. Kuenzel, 2023. "Geographical Protections and Trade: Product-level Evidence from EU Agreements," Wesleyan Economics Working Papers 2023-001, Wesleyan University, Department of Economics.
    15. Leudjou, Roland, 2021. "Assessing the impacts of eliminating Non-Tariff Barriers in the framework of the African Continental Free Trade Area on Cameroons economy," Conference papers 330231, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    16. Chae-Deug Yi, 2022. "The impact of the Japan-European Union Economic Partnership Agreement on the trade and income of Japan, the European Union, and South Korea," Asia Europe Journal, Springer, vol. 20(3), pages 329-356, September.
    17. Christopher M. Dent, 2021. "Trade, Climate and Energy: A New Study on Climate Action through Free Trade Agreements," Energies, MDPI, vol. 14(14), pages 1-30, July.

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    More about this item

    Keywords

    Structural Gravity; Trade Policy; Free Trade Agreements; Interval Data;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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