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• A review of the border effect literature – is domestic trade really biased?

  81-102

  Ádám Márkus

  Views:

  146

  The aim of this article is to give a comprehensive review of the border effect literature. The author demonstrates through a number of empirical results that state borders still obstruct commodity trade flows between countries significantly, even in the twenty first century’s globalized world market. Countries’ trade patterns show a massive bias toward domestic markets, which can be only partially justified by formal factors such as income differences, distances, tariffs, cultural or linguistic dissimilarities and different currencies. Controlling for all these factors does not abolish the hindering role of borders, which suggests that the preference for domestic partners is excessive. The paper analyses major gravity model specifications and estimation methods in order to shed light on solving the border puzzle.
  

  Journal of Economic Literature (JEL) kódok: F14, F15

• The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review

  119-133

  SIBULELE MCHANI

  Views:

  290

  This paper reviews the theoretical and empirical literature on the impact of regional trade agreements on trade. The empirical literature is arranged based on the econometric
  methods used to estimate the gravity model. Advantages and disadvantages of each method were highlighted. Papers covering RTAs from Africa, Asia, the Americas, and Europe were reviewed to gain a more representative understanding. The covered empirical literature suggests that the Poisson Pseudo Maximum Likelihood (PPML) estimator is more reliable than OLS in estimating gravity models, as it can deal with zero trade flows. The Fixed Effects (FE) approach produces more consistent estimates than the Random Effects (RE) approach when quantifying the effects of RTAs. This is because it allows one to control for the unobserved time-invariant variables. Surprisingly, the covered literature suggests that a great majority of African RTAs generated trade, regardless of the method of estimation used.

  Journal of Economic Literature (JEL) codes: F13, F15