Estimating China’s Trade with Its Partner Countries within the Belt and Road Initiative Using Neural Network Analysis

Koffi Dumor and Li Yao
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Koffi Dumor: School of Management and Economics, University of Electronic Science and Technology of China, No. 2006, Xiyuan Ave, West Hi-Tech Zone, Chengdu 611731, China
Li Yao: School of Management and Economics, University of Electronic Science and Technology of China, No. 2006, Xiyuan Ave, West Hi-Tech Zone, Chengdu 611731, China

Sustainability, 2019, vol. 11, issue 5, 1-22

Abstract: The Belt and Road Initiative (BRI) under the auspices of the Chinese government was created as a regional integration and development model between China and her trade partners. Arguments have been raised as to whether this initiative will be beneficial to participating countries in the long run. We set to examine how to estimate this trade initiative by comparing the relative estimation powers of the traditional gravity model with the neural network analysis using detailed bilateral trade exports data from 1990 to 2017. The results show that neural networks are better than the gravity model approach in learning and clarifying international trade estimation. The neural networks with fixed country effects showed a more accurate estimation compared to a baseline model with country-year fixed effects, as in the OLS estimator and Poisson pseudo-maximum likelihood. On the other hand, the analysis indicated that more than 50% of the 6 participating East African countries in the BRI were able to attain their predicted targets. Kenya achieved an 80% (4 of 5) target. Drawing from the lessons of the BRI and the use of neural network model, it will serve as an important reference point by which other international trade interventions could be measured and compared.

Keywords: belt and road initiative; trade; gravity model; neural network analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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