NDLI: Gravity models in integrated panels

Content Provider	Springer Nature Link
Author	Fidrmuc, Jarko
Copyright Year	2008
Abstract	This paper shows that standard gravity models of foreign trade include non-stationary variables (bilateral trade and GDP of trading partners). Furthermore, gravity models are characterized by inherited cross-sectional correlation between the panel units (country pairs). Therefore, the results of the standard panel unit root tests are biased and outperformed by the simple cross-sectionally augmented panel unit root test according to Pesaran (J Appl Econom 22:265–312, 2007). Nevertheless, the fixed effects estimator is similar to the dynamic OLS or fully modified OLS, which take into account the non-stationarity of analyzed macroeconomic variables as well as possible endogeneity between output and trade.
Starting Page	435
Ending Page	446
Page Count	12
File Format	PDF
ISSN	03777332
Journal	Empirical Economics
Volume Number	37
Issue Number	2
e-ISSN	14358921
Language	English
Publisher	Springer-Verlag
Publisher Date	2008-09-23
Publisher Place	Berlin, Heidelberg
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Gravity models Trade Panel unit root tests Panel cointegration Cross-sectional correlation Statistics for Business/Economics/Mathematical Finance/Insurance Economic Theory Economics general Econometrics
Content Type	Text
Resource Type	Article
Subject	Statistics and Probability Social Sciences Economics and Econometrics

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Gravity models in integrated panels