Gravity-model Estimation with Time-interval Data: Revisiting the Impact of Free Trade Agreements

Peter Egger, Mario Larch and Yoto Yotov

No 2020-11, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: We challenge the common practice of estimating gravity equations with time-interval data in order to capture dynamic-adjustment effects to trade-policy changes. Instead, we point to a series of advantages of using consecutive-year data recognizing dynamic-adjustment effects. Our analysis reveals that, relative to time-interval data, the proposed approach avoids downward-biased effect estimates due to the distribution of trade-policy events during an event window as well as due to anticipation (pre-interval) and delayed (post-interval) effects, and it improves the efficiency of effect estimates due to the use of more data.

Keywords: Structural Gravity; Trade Policy; Free Trade Agreements; Interval Data (search for similar items in EconPapers)
JEL-codes: F10 F14 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020-09-04
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (23)

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Working Paper: Gravity-Model Estimation with Time-Interval Data: Revisiting the Impact of Free Trade Agreements (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2020_011

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