The determinants of bilateral trade

Abstract.  In this paper we present a monopolistic competition model that incorporates asymmetric trade barriers and international differences in production costs. The model implies a highly non‐linear bilateral trade equation. Estimation of this equation yields parameters for the elasticity of substitution and trade costs that are more reasonable than those found in previous studies. A simulation indicates that trade liberalization will shift trade from rich countries to poor countries and from within continental trading partners with preferential trade agreements to intercontinental trading partners. JEL Classification: F1     

The nonlinear impact of currency unions on bilateral trade

Most gravity model specifications assume that a currency union varies the level of bilateral trade between members by a constant proportion. We demonstrate that a common currency also alters the slope of the relationship between bilateral trade and member country GDPs.     

Estimating the bilateral impact of nontariff measures on trade

This paper seeks to estimate how the impact of nontariff measures (NTMs) on trade can vary across exporter–importer pairs. Covering data for the early 2000s, regressions are run at a disaggregate tariff line level and the estimated results are converted into ad valorem equivalents (AVEs). The results underline the importance of conditioning conclusions on trading partners and products and demonstrate that the same NTM can have different—even opposite—effects across exporting countries. One general pattern that emerges is that low‐income importers impose more restrictive NTMs, but that the capacity for exporting countries to address NTMs increases with GDP per capita.     

The Korea-Vietnam trade and the bilateral exchange rate: Asymmetric evidence from commodity trade data

The contribution of the current article is to detect the asymmetric impact that exchange rate fluctuations have on Korea's trade with Vietnam. To this end, the nonlinear autoregressive distributed lag (NARDL) process is applied to export and import data disaggregated by 25 commodities. We uncover that the ups and downs of exchange rates have an asymmetric impact on some, though not all, types of Korea's commodities exported to and imported from Vietnam in both the long- and short-run.     

The trade destruction effect and trade diversion effect of RMB appreciation

This paper examines how Chinese RMB appreciation affects China and its competitor’s exports to the third market at industry level. We develop a two-country competition model to analyze the trade destruction effect and trade diversion effect of RMB appreciation. The theoretical analysis shows that the appreciation of RMB has negative impacts on China’s exports and positive impacts on its competitor’s exports. We then empirically test how the appreciation of RMB to the US dollar affects China’s and India’s textiles and apparel exports to the US from 1995Q1 to 2008Q4. The empirical results show that an 1% appreciation of RMB to US dollar will reduce China’s exports of textiles & apparel to the U.S. by 2.63% and raise the India’s exports of textiles & apparel to the U.S. by 2.71%.     

The impact of Africa‐China's diplomatic visits on bilateral trade

This article documents that African leaders’ state visits to China could stimulate China's exports to Africa in capital intensive manufacturing goods. We further find that state visits significantly increase official aid and exports by state‐owned enterprises to African countries which contribute to the trade growth after state visits.     

Optimal bilateral trade of multiple objects

We study a private-values buyer–seller problem with multiple objects. Valuations are binary and i.i.d. We construct mechanisms that span the set of all Pareto-efficient outcomes. The induced trading rules for objects are linked in a simple way.     

The demand for imports: Estimates of bilateral trade flows

This paper provides estimates, using a traditional import demand model, of the demand for imports on a bilateral basis among nine industrialized nations. These estimates provide greater detail about price and income elasticities, but in general are consistent with earlier, aggregate import demand studies with respect to conclusions about the effects of secular and cyclical income changes on trade balances and whether sufficiently high price elasticities are present to insure that the Marshall-Lerner stability condition is met.     

矿业权市场效果的博弈分析

在矿业权有偿制度确立之前,政府曾花去大量的人力、物力、财力监管矿山企业的"三率"指标.但收效甚微,并且导致影响矿产业航向的矿产品价格也严重扭曲.运用博弈论分析发现,矿业权市场竞争机制是一种能让矿业企业自觉改善"三率"指标、理顺矿产品价格的有效的自我实施机制.     

The heterogeneous effect of finance on international trade

Is the impact of financial development on international trade heterogeneous – being positive, negative or null – across manufacturing sectors? And is it dependent on the level of sectoral requirement on external finance for capital need? To examine these questions this article uses a panel trade database on 21 manufacturing sectors in 80 countries between 2000 and 2009. The analysis demonstrates that the effect of financial development on trade is indeed heterogeneous by estimating a coefficient for each sector and showing that the signs and significance levels vary across them. The article also demonstrates that sectors with strong reliance on external finance export higher volume from countries with developed financial system and that financial development reduces trade in industries with low financial dependence level.     

The double EMG distribution and trade elasticities

Using Brazilian export data that, unlike many trade data sets, have a full record of small export sales, this paper reconsiders trade elasticities and the welfare gains from trade. Using the Brazilian data, this paper provides novel evidence on the properties of the distributions of log‐export sales and shows that the double exponentially modified Gaussian (EMG) distribution parsimoniously captures these properties. Using the double EMG distribution in a standard monopolistic competition model of trade, this paper demonstrates that data truncation, which is prevalent in many data sets, leads to an upward bias in measuring the partial elasticity of trade with respect to variable trade costs. This bias subsequently leads to the underestimation of the gains from trade by 1% to 9% depending on the extent of data truncation, a range that is commensurate with typical economic growth and large booms.     

Per capita income and the extensive margin of bilateral trade

This paper quantitatively explores the role of demand in explaining the positive correlation between an importer's per capita income and the extensive margin of bilateral trade. The theoretical mechanism is based on agents that increase the set of goods they consume with income. This affects the structure of a country's import demand and therewith the extensive margin of trade. We formalize this intuition by incorporating preferences that allow for binding non‐negativity constraints into an otherwise standard Ricardian multi‐country model. We quantify the model and find that the behaviour of the model's extensive margin of trade is consistent with the data.     

The dynamic impact of bilateral trade linkages on stock market correlations of Australia and China

This article aims to examine the long-run equilibrium relationship between bilateral trade linkages and stock market correlations of Australia and China using quarterly data from 1993 to 2015. Further, this study explores the impact of trade intensity on stock market correlations using OLS, Dynamic OLS (DOLS) and Fully Modified OLS (FMOLS) models. The empirical results confirm that there is a significant long-run relationship among the variables. In addition, our results, based on OLS, DOLS and FMOLS, show that increasing trade intensity between Australia and China has a significant and positive impact on their stock market correlations. The Global Financial Crisis also contributed for their stock market interdependence. Our results therefore suggest that the bilateral trade relations between Australia and China have brought their stock markets together over time. The findings of this study offer significant policy and practical implications. The policymakers need to be aware of the economic changes in those countries as they will immediately reflect on their stock market performance and relationship. Similarly, the global investors need to be aware of the fact that the diversification opportunities between Australia and China have considerably declined over time as their markets became more interdependent in the recent past.     

Effects of Islamic religiosity on bilateral trust in trade: The case of Turkish exports

Using a rich firm level data set for Turkish manufacturing, we test whether sharing similar religious beliefs with potential contracting parties drives a firm’s first time entry into export markets. We exploit variation in the practice of Islam across Turkish NUTS3 regions and we find that firms located in regions characterised by stronger religiousness are more likely to enter export destinations with a higher share of Muslims among their population. This result is robust to the control for past trade, common language, cultural and migration ties as well as for selective trade policy in favour of politically connected religious business groups. In particular, religious proximity eases export entry for producers of “trust intensive” goods, it favours subsequent foreign market entries and reduces the export exit probability. All in all, our evidence supports an export enhancing effect of religious proximity working through export sunk costs reduction rather than through similarity in preferences.     

The factor content of regional bilateral trade: The role of technology and demand

The Heckscher–Ohlin–Vanek (HOV) model in its strict form has been strongly rejected by the data. Relaxing some assumptions of the standard HOV model is key to find improvements in its performance. We apply the Davis and Weinstein (2001) methodology to analyse the validity of the HOV model using regions rather than countries. Surprisingly, our results using data for 17 Spanish regions are similar to theirs with international data for OECD countries. Accounting for technological differences improves the predictive capacity of the factor proportions model and including trade costs and geography reduces significantly the missing trade problem. However, relaxing the assumption of factor price equalisation does not improve the performance of the HOV model in a regional setting.     

The effect of immigrants on the extensive and intensive margins of trade

This study examines the impact of immigrants on the extensive and intensive margins of South Korean exports. Since trade data contain excessive zero trade flows, we adopt recently suggested Poisson and Gamma pseudo maximum likelihoods. ???Our finding shows that immigrant stock in South Korea has significant effect on both the extensive and intensive margins of South Korean exports. Immigrants’ network seems to decrease variable as well as fixed costs of trade.     

U.S. bilateral trade balances and the dollar

U.S. bilateral export and import values with seven large trading partners are tested for real exchange rate effects over 1975–1985. The results suggest that dollar devaluation would have the most favorable impact on the U.S. trade balance in the case of Japan and the least favorable in the case of Canada.     

Functional income distribution and aggregate demand in the Euro area

An increase in the wage share has contradictory effects on thesubaggregates of aggregate demand. Private consumption expendituresought to increase because wage incomes typically are associatedwith higher consumption propensities than capital incomes. Investmentexpenditures ought to be negatively affected because investmentwill positively depend on profits. Net exports will be negativelyaffected because an increase in the wage share corresponds toan increase in unit labour costs and thus a loss in competitiveness.Therefore, theoretically, aggregate demand can be either wage-ledor profit-led depending on how these effects add up. The resultswill crucially depend on how open the economy is internationally.The paper estimates a post-Kaleckian macro model incorporatingthese effects for the Euro area and finds that the Euro areais presently in a wage-led demand regime. Implications for wagepolicies are discussed.