A SUR-EC-AR System Gravity Model of Trade

Jaya Krishnakumar (jaya.krishnakumar@unige.ch)

No B4-4, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data

Abstract: This paper proposes a system of equations for modelling the volume of bilateral trade in multiple goods for a given set of countries. We postulate a gravity equation for each traded good rather than for the aggregate volume of bilateral trade. Special features of the system are the possibility of correlated explanatory variables, presence of panel data effects and autocorrelated disturbances. The correlated explanatory variables could be either correlated with the specific effects only or correlated with both the specific effects and the residual errors. Proper ways of specifying and estimating a model incorporating all the above characteristics are discussed and tests are suggested to verify some of the assumptions.

Keywords: bilateral trade; gravity model; panel data models; instrumental variables; autocorrelated errors (search for similar items in EconPapers)
JEL-codes: C33 F1 (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (3)

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