Trade network reconstruction and simulation with changes in trade policy

Yuichi Ikeda () and Hiroshi Iyetomi
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Yuichi Ikeda: Kyoto University
Hiroshi Iyetomi: Niigata University

Evolutionary and Institutional Economics Review, 2018, vol. 15, issue 2, No 16, 495-513

Abstract: Abstract The interdependent nature of the global economy has become stronger with increases in international trade and investment. We propose a new model to reconstruct the international trade network and associated cost network by maximizing entropy based on local information about inward and outward trade. We show that the trade network can be successfully reconstructed using the proposed model. In addition to this reconstruction, we simulated structural changes in the international trade network caused by changing trade tariffs in the context of the government’s trade policy. The simulation for the FOOD category shows that import of FOOD from the US to Japan increase drastically by halving the import cost. Meanwhile, the simulation for the MACHINERY category shows that exports from Japan to the US decrease drastically by doubling the export cost, while exports to the EU increased.

Keywords: International trade network; Entropy maixmization; Network reconstruction (search for similar items in EconPapers)
JEL-codes: F47 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s40844-018-0110-0

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