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Decomposition of Bilateral Trade Flows Using a Three-Dimensional Panel Data Model

Author

Listed:
  • Yufeng Mao
  • Bin Peng
  • Mervyn J Silvapulle
  • Param Silvapulle
  • Yanrong Yang
Abstract
This study decomposes the bilateral trade flows using a three-dimensional panel data model. Under the scenario that all three dimensions diverge to infinity, we propose an estimation approach to identify the number of global shocks and countryspecific shocks sequentially, and establish the asymptotic theories accordingly. From the practical point of view, being able to separate the pervasive and nonpervasive shocks in a multi-dimensional panel data is crucial for a range of applications, such as, international financial linkages, migration flows, etc. In the numerical studies, we first conduct intensive simulations to examine the theoretical findings, and then use the proposed approach to investigate the international trade flows from two major trading groups (APEC and EU) over 1982-2019, and quantify the network of bilateral trade.

Suggested Citation

  • Yufeng Mao & Bin Peng & Mervyn J Silvapulle & Param Silvapulle & Yanrong Yang, 2021. "Decomposition of Bilateral Trade Flows Using a Three-Dimensional Panel Data Model," Monash Econometrics and Business Statistics Working Papers 7/21, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2021-7
    as

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    File URL: https://www.monash.edu/business/ebs/research/publications/ebs/wp07-2021.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    three-dimensional panel data; bilateral trade; asymptotic theory;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages

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