A gravity model for international trade and conflict

Youssef OUKHALLOU

Abstract


Abstract. This paper investigates the nexus between conflict and trade using data from 77 countries. For this purpose, it puts forward a gravity model that is augmented with interstate conflict casualties. In order to overcome statistical problems related to heteroscedasticity and the omission of the extensive margin (the zero observations), the gravity model is estimated using a Poisson Pseudo-Maximum Likelihood method (PPML). The model suggests a downward impact on trade that affects all sides of the conflict, whether they suffer casualties or deal them. However, said impact remains small, which hints that even before direct conflicts occur, the involved countries are less likely to have significant trade flows.

Keywords. International trade, Armed conflict, Gravity model.

JEL. C23, F14, F51.

Keywords


International trade; Armed conflict; Gravity model.

Full Text:


References


Baier, S.L., & Bergstrand, J.H. (2007). Do free trade agreements actually increase members’ international trade?, Journal of International Economics, 71(1), 72-95. doi. 10.1016/j.jinteco.2006.02.005

Büthe, T., & Milner, H.V. (2008). The politics of foreign direct investment into developing countries: Increasing FDI through regional trade agreements, American Journal of Political Science, 53(4), 741-762. doi. 10.1111/j.1540-5907.2008.00340.x

Dupuy, K., & Rustad, S.A. (2017). Trends in armed-conflict, 1946-2017, Conflict Trends No. 5, Peace Research Institute Oslo (PRIO). [Retrieved from].

Frankel, J.A. (1997). Regional Trading Blocs in the World Economic System, DC: Institute for International Economics, October.

Fukao, K., Ishido, H., & Ito, K. (2003). Vertical intra-industry trade and foreign direct investment in East Asia, Journal of the Japanese and International Economies, 17(4), 468-506. doi. 10.1016/j.jjie.2003.09.004

Glick, R., & Rose, A.K. (2002). Does a currency union affect trade? The time-series evidence, European Economic Review, 46(6), 1125-1151. doi. 10.1016/S0014-2921(01)00202-1

Goldberger, A.S. (1991). A Course in Econometrics, Cambridge, MA: Harvard University Press.

Liu, X. (2009). GATT/WTO promotes trade strongly: sample selection and model specification, Review of International Economics, 17(3), 428–446. doi. 10.1111/j.1467-9396.2009.00816.x

Rose, A.K. (2000). One money, one market: the effect of common currencies on trade, Economic Policy, 30(15), 7-45.

Santos-Silva, J., & Tenreyro, S. (2006). The log of gravity, The Review of Economics and Statistics, 88(4), 461-658. doi. 10.1162/rest.88.4.641

Stockholm International Peace Research Institute – SIPRI (2018). Armaments, disarmament and international security, SIPRI Yearbook, Stockholm. [Retrieved from].




DOI: http://dx.doi.org/10.1453/jepe.v7i3.2094

Refbacks

  • There are currently no refbacks.


Bookmark and Share


.......................................................................................................................................................................................................................................................................................................................................

Journal of Economics and Political Economy - J. Econ. Pol. Econ. - JEPE - www.kspjournals.org

ISSN: 2148-8347

Editor: jepe@ksplibrary.org   Secretarial: secretarial@ksplibrary.org   Istanbul - Turkey.

Copyright © KSP Library