The log of gravity revisited

Inmaculada Martínez-Zarzoso, Felicitas Nowak-Lehmann D. and Sebastian Vollmer
Authors registered in the RePEc Author Service: Felicitas Nowak-Lehmann D.

No 64, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: This paper evaluates the performance of alternative estimation methods for multiplicative and log models with heteroskedasticity. Contrary to Santos Silva and Tenreyro (2006), the results of a simulation study indicate that the Pseudo Poisson Maximum Likelihood estimator (PPML) is not always the best estimator. New estimates of the gravity equation are obtained for three different datasets with traditional methods (OLS and FGLS) and with the PPML. We find that the PPML assumption concerning the pattern of heteroskedasticity is, in most cases, rejected by the data and PPML estimates are outperformed by OLS and FGLS estimates in out-of-sample forecast.

Keywords: simulations; Poisson regression; constant-elasticity models; heteroskedasticity; feasible generalized least squares (FGLS); maximum likelihood (search for similar items in EconPapers)
JEL-codes: C33 Q25 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:64

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