Effects of COVID-19 on trade flows: Measuring their impact through government policy responses

This paper examines the impact of COVID-19 on bilateral trade flows using a state-of-the-art gravity model of trade. Using the monthly trade data of 68 countries exporting across 222 destinations between January 2019 and October 2020, our results are threefold. First, we find a greater negative impact of COVID-19 on bilateral trade for those countries that were members of regional trade agreements before the pandemic. Second, we find that the impact of COVID-19 is negative and significant when we consider indicators related to governmental actions. Finally, this negative effect is more intense when exporter and importer country share identical income levels. In the latter case, the highest negative impact is found for exports between high-income countries.

Does official development assistance promote tourism demand for donor countries? Evidence from Switzerland

This study estimates the effect of official development assistance (ODA) on tourism demand of recipient countries for donor countries. We analyzed a panel dataset of 15 recipient countries of Switzerland’s aid from 2005 to 2017, for which data are available. We used both tourist arrivals at lodging establishments, particularly hotels, in Switzerland and hotel nights as proxies for recipient countries’ tourism demand in Switzerland. Using a modified gravity model of trade for empirical testing, we found that an increase of every US$1000 ODA to recipient countries would generate 3.6 tourist arrivals and almost four hotel nights in the following year, after controlling for the effects of GDP and population of recipient countries, the exchange rate and the distance between recipient countries and Switzerland, and trade facilitators. We conclude that ODA generates a positive externality on donor countries, namely, that recipient countries incline to increase their imports from donor countries, at least partially in the form of inbound tourism in donor countries.

Towards a Theoretical Framework for the Allocation of Resources to African Air Transport

Tourism is essential to Africa’s economic growth, yet it is constrained by the limitations of the airline industry. The African airline industry faces challenges which inhibit its ability to provide the level of air transport connectivity demanded to fully realise the potential of tourism, into and within, Africa. This study proposes a synoptic model which will enable the impact of the African airline industry’s challenges to be assessed in terms of their effect on the tourism industry. This then lays the groundwork for a remediation strategy. In this qualitative study, data was collected through C-Suite face-to-face interviews with purposively selected senior managers in the airline industry. The study revealed the key challenges facing the African airline industry and proposed a conceptual model to enable informed decisions for improving airline connectivity. The major contribution of the study is the development of a proposed African Air connectivity Model which quantifies a connectivity measure as a proxy for distance in the gravity model of trade.

Transitional Growth and Trade with Frictions: A Structural Estimation Framework

We build and estimate a structural model of transitional growth and trade in a many-country world. The gravity model of trade is combined with a capital accumulation mechanism driving transition between steady states. Trade affects growth through changes in consumer and producer prices. Simultaneously, capital accumulation affects trade directly through changes in country size and indirectly through changes in the incidence of trade costs. Theory maps to an econometric system that identifies the parameters of the model and establishes causal links between trade, capital accumulation and income. Counterfactual trade liberalisation magnifies static gains by a dynamic path multiplier of 1.8.

Barriers to Trade: How Border Walls Affect Trade Relations

Since trade must cross borders, to what extent do border walls affect trade flows? We argue that border walls can reduce trade flows. Even if the objective is to only stem illicit flows, border walls heighten “border effects” that can also inhibit legal cross-border flows. Using a gravity model of trade that reflects recent developments in both economic theory and econometrics, we find that the creation of a wall is associated with a reduction in legal trade flows between neighboring countries. We provide a battery of evidence that suggests this reduction is not simply a function of worsening bilateral relations. Our findings have implications for understanding how governments have taken measures to assert sovereign control of their borders in an age of increasing economic globalization.

International Trade Implications of Highly Pathogenic Poultry Disease Events

Animal disease events can lead to international trade restrictions which can vary in duration, products included, and geographical extent. Accounting for multilateral resistance between trading partners, a general gravity model of trade is estimated with a Hausman-Taylor and a Hausman-Taylor seemingly unrelated estimator to evaluate the trade quantity impact by commodity resulting from highly pathogenic poultry disease events in 24 exporting markets. Commodity specific results show that quantity traded and products demanded during a disease event differ by commodities. Understanding these impacts can better prepare exporters for potential changes in trade quantity given a disease event.

The gravity model of trade

Purpose. The purpose of this study is to trace the theoretical developments of the gravity model of trade. The key question is: what are the dominant features of the development of the gravity trade model? Methodology. This research is conducted by employing a number of methods that include the historical, descriptive and analytical methods. The main contribution of this paper is to trace the historical and theoretical development phases of the gravity model. Findings. This study is a novel attempt in terms of the identification of the four distinctive phases of the development of the gravity model. This work would, therefore, expand the existing literature on the gravity model. We argue that the development of the gravity model is the outcome of many research efforts. A large body of literature has given the model a solid theoretical foundation. But there is no consensus about the proper econometric estimation methods of the model. The gravity model is significant both historically and analytically. It is a useful tool for the analysis of international trade. It has become a popular research device used by the researchers and policy makers around the world. The gravity is regarded as one of the most successful models in the literature of international economics. Originality. The original contributions of this paper lie in streamlining the consistent historical development of the gravity model over a longer period of time-frame, ranging from 1885 to 2018. Limitations and Implications. This work is theoretical aspects of the trade gravity model. Future researchers could overcome the limitations by combining the theoretical and empirical studies in a paper. This paper can help the future researchers in dealing with the broad body of literature of gravity model. Acknowledement. This study was supported by the National Natural Science Foundation of China (grants No.71673223 & 71473197), and a PhD scholarship from the China Scholarship Council (CSC). The first author would like to thank the CSC for the financial support. He also acknowledges the invaluable research advice and guidance received from Dr. Yoto V. Yotov, professor at the School of Economics of the Lebow College of Business at Drexel University, Philadelphia, USA. The authors are highly grateful to the anonymous reviewers, managing editor, and the editor-in chief for their kind help and critical comments on the earlier drafts of the paper. However, the authors are responsible for the contents and limitations of the study. They declared no conflict of interests.