Proper econometric specification of the gravity model

Article Abstract:

The practice of utilizing gravity type models to demonstrate the significance of trading blocs and economic areas such as APEC, MERCOSUR and NAFTA, is evaluated. The use of the models in examining the hypothesis that trading blocs are significant in determining the volume of exports can be misspecified. The accurate econometric representation of the gravity type model considers the volume of trade from a country to another country at a given period of time, the gross domestic product of both countries as well as the distance between them.

International economic relations

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The gravity model: some econometric considerations

Article Abstract:

Gravity type models are widely used in evaluating economic phenomena associated with the flow of goods and/or services. Since these models are commonly used for policy analysis, especially to examine the impact of trading blocs, it is very significant to get the econometrics right and prevent unwanted mistakes in the modelling process. An optional specification of the gravity models for world models and huge data sets and a testing procedure to evaluate one of the fundamental assumptions of these models are presented.

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A note on the performance of simple specification tests for the Tobit model

Article Abstract:

A study was conducted to analyze computationally tractable specification tests for the Tobit framework. Sampling experiments were performed to carry out the analysis. The size performance of Tobit specification tests were then examined, including their ability to determine specific types of model misspecifications. Results indicated that a simplified information matrix tests and conditional moments-based tests support excellent performance for the model.

Research and Development in the Physical, Engineering, and Life Sciences, Statistics, Research, Statistics (Data), Statistics (Mathematics)

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