A Mixed Model Approach for Dynamic Trade Networks

• Activity Number: 241 - SPEED: Statistics in Social Sciences and Survey Research Part 1
• Type: Contributed
• Date/Time: Tuesday, August 9, 2022 : 8:30 AM to 10:20 AM
• Sponsor: Business and Economic Statistics Section
• Author(s): Burcu Eke Rubini* and Loris Rubini
• Companies: University of New Hampshire and University of New Hampshire
• Keywords: dynamic networks; international trade; relational data; network analysis

Abstract

This paper provides an approach to model time dependent network structure with applications to international trade. We study how a trade shock between two countries can potentially affect trade with a third country by developing a theoretical model where trade between countries forms a time dependent dynamic relational network. The model allows for complementarities in trade, that is, a positive shock between two countries affects trade with third parties. We first determine the countries in the same network, then we derive a new type of gravity equation, where the network structure plays a determinant role. We apply the methodology to a longitudinal bilateral trade flow data from US and 23 countries.