Quantifying the Impact of Exporter-Specific, Importer-Specific and only Time-Varying Variables in Structural Gravity

Dadakas, Dimitrios (2020): Quantifying the Impact of Exporter-Specific, Importer-Specific and only Time-Varying Variables in Structural Gravity.

Abstract

Advances in gravity literature have presented econometric approaches for the theoretically consistent estimation of structural gravity. When estimating the impact of policy-shocks on trade values however, researchers are confronted with two problems. Once multilateral resistances are taken into account, through time-varying importer and exporter fixed effects, they absorb the effect of policy-shock indicator variables. Hence, we cannot obtain a coefficient for the impact of policy. The second problem is rooted in the necessary panel data dimensions in structural gravity that requires multiple-exporters and multiple-importers. The (at least) three dimensional panel implies that any coefficients/impacts that are estimated apply to the whole set of exporters rather than the country related to the scope of the research. I propose a method to approach these two problems, estimate the impact that policy-shock variables have on trade and differentiate the results for the country/countries related to the scope of the research. A short application on the impact that the Global Financial Crisis had on trade values is presented.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade, Structural Gravity, PPML, Poisson Pseudo Maximum Likelihood, Global Financial Crisis
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C10 - General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade

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