Enhanced Gravity Model of Trade: Reconciling Macroeconomic and Network Models

AbstractFrom December 2014 to June 2015, U.S. poultry was affected by highly pathogenic avian influenza that led to destruction of 48 million birds and losses in international trade. During the event, 45 countries placed trade restrictions on U.S. poultry exports, varying from regionalized to national poultry restrictions. Using a gravity model of trade, the effects on quantity traded is estimated for poultry exports at the aggregated and disaggregated commodity level to understand product flows during an event. Results indicate U.S. poultry exports benefit from countries willing to apply limited trade restrictions, and the trade impact varies across disaggregated commodities.

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A Gravity Model of Trade for Nicaraguan Agricultural Exports

Cuadernos de Economía ◽

10.15446/cuad.econ.v37n74.55016 ◽

2018 ◽

Vol 37 (74) ◽

pp. 391-428

Author(s):

Medardo Aguirre González ◽

Claudio Candia Campano ◽

Lilliam Antón López

Keyword(s):

Gravity Model ◽

Free Trade ◽

Free Trade Agreement ◽

Free Trade Agreements ◽

Trade Agreement ◽

Ordinary Least Squares ◽

Agricultural Exports ◽

Determining Factors ◽

Trading Partners ◽

Gravity Model Of Trade

This research aims to find the determining factors of Nicaraguan agricultural exports. To carry out this study, the author formulated a Gravity Model of Trade (GMT) and then made an estimation using a version of Ordinary Least Squares (OLS) that incorporates a consistent covariance matrix estimator to correct the heteroskedasticity and autocorrelation effects. The data considered observations over twenty years and for twelve countries: eight have signed a Free Trade Agreement (FTA) with Nicaragua and four have not. The variables that significantly increased the flow of Nicaraguan agricultural exports are the following: Nicaragua’s trading partners’ population, Nicaragua’s Gross Domestic Product per capita (GDP pc), the Real Exchange Rate (RER), and Nicaragua’s trading partners’ GDP pc; however, the distance variable turned out to be significantly trade-inhibiting. Free Trade Agreements (FTAs) predominantly have significant effects.

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Does German Development Aid Promote German Exports?

German Economic Review ◽

10.1111/j.1468-0475.2008.00458.x ◽

2009 ◽

Vol 10 (3) ◽

pp. 317-338 ◽

Cited By ~ 36

Author(s):

Inmaculada Martínez-Zarzoso ◽

Stephan Klasen ◽

Felicitas Nowak-Lehmann D. ◽

Mario Larch

Keyword(s):

Gravity Model ◽

Development Aid ◽

Point Estimate ◽

Steady Increase ◽

German Development ◽

Trade Show ◽

Long Run ◽

Gravity Model Of Trade ◽

Over Time

Abstract This paper uses a static and dynamic gravity model of trade to investigate the link between German development aid and exports from Germany to the recipient countries. The findings indicate that, in the long run, German aid is associated with an increase in exports of goods that is larger than the aid flow, with a point estimate of 140% of the aid given. In addition, the evolution of the estimated coefficients over time shows an effect that is consistently positive but that oscillates over time. Interestingly, after a decrease in the 1990s, the estimated coefficients of the effect of aid on trade show a steady increase in the period between 2001 and 2005. The paper distinguishes among recipient countries and finds that the return on aid measured by German exports is higher for aid to countries considered ‘strategic aid recipients’ by the German government.We also find some evidence that aid given by other EU members reduces German exports.

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The Gravity Model Of Trade Applied To Africa

International Business & Economics Research Journal (IBER) ◽

10.19030/iber.v9i3.543 ◽

2010 ◽

Vol 9 (3) ◽

Author(s):

Michael M. Tansey ◽

Alhagie Touray

Keyword(s):

Gravity Model ◽

African Country ◽

The Other ◽

Colonial Power ◽

Large Share ◽

African Countries ◽

Logarithmic Model ◽

Goods And Services ◽

Potential Development ◽

Gravity Model Of Trade

The gravity model states that trade between any two countries is proportional, other things equal, to the product of the two countries’ GDPs, and diminishes with the distance between the two countries. The logic is that larger economies tend to spend large amounts on imports and attract large share of other countries spending (exports) because they produce large quantity and variety of goods and services. Distance, on the other hand, tends to lessen trade between countries because of transportation costs and other intangible barriers, such as language, geography, and historic colonial relationships. The following specific hypotheses from the gravity model of trade are tested with respect to African countries alone: The amount of exports by one African country to another is inversely related to the distance between the two countries, The amount of exports by one African country to another reflects the GDP of the country to whom the exports are sent, The amount of exports directly reflects a country’s own GDP, and Countries associated with the same colonial power experience greater trade. Each of these hypotheses is tested with logarithmic forms of the variables in the hypotheses. While the resulting logarithmic model works is statistically significant and bears the correct signs, it does not show colonial patterns to be a strong as those found in other studies that are focused on inter-continental trade relationships. The significance of colonization in other studies may be a surrogate for the degree of development of nations. Since trade grows less than proportionately both with respect to the GDP of the importing nation and with respect to the GDP of the exporter, this study shows a disappointing trade impact of growth in the developing world on the potential development of Africa through export growth.

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