Barriers to international trade

Five cross sections of international trade data are analyzed by means of a gravity model in order to measure the impact of geographical distance, preferential agreements, language similarities, historical ties, and exchange rate volatilities on the pattern of world trade. The model is derived as a reduced form of a partial price equilibrium. A heteroscedastic log-linear specification is chosen in the econometric application, which is estimated by the maximum quasi-likelihood approach. Results show significant coefficients with expected signs in almost all cases.

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