Effects of Regional Trade Agreements Using a Static and Dynamic Gravity Equation

Inmaculada Martínez-Zarzoso, Felicitas Nowak-Lehmann D. () and Nicholas Horsewood
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Felicitas Nowak-Lehmann D.: Universität Göttingen, http://www.iai.wiwi.uni-goettingen.de
Nicholas Horsewood: University of Birmingham
Authors registered in the RePEc Author Service: Felicitas Nowak-Lehmann D.

No 149, Ibero America Institute for Econ. Research (IAI) Discussion Papers from Ibero-America Institute for Economic Research

Abstract: This paper evaluates the static effects of preferential agreements between several economic blocs and areas using a dynamic gravity equation. The main aim is to investigate whether regionalism has fostered intra or/and extra blocs international trade, taking into account the existence of heterogeneity over time and across countries and testing whether a dynamic model is preferred to the traditional static specification of the gravity model. This paper argues that the gravity model should be best estimated using Blundell and Bond’s (1998) system-GMM estimator. This procedure remedies some econometric problems such as regressor endogeneity, measurement error and weak instruments, and controls for timeinvariant country-specific effects such as distance or common language.

Keywords: Gravity equation; integration; international trade; regionalism (search for similar items in EconPapers)
JEL-codes: F14 F15 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2006-07-07
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:got:iaidps:149

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