International trade fluctuations: global versus regional factors

Jackson, K. and Beck, K. 2024. International trade fluctuations: global versus regional factors. Canadian Journal of Economics. 57 (1), pp. 331-358. https://doi.org/10.1111/caje.12702

TitleInternational trade fluctuations: global versus regional factors
TypeJournal article
AuthorsJackson, K. and Beck, K.
Abstract

This paper examines the relative importance of global, regional, country and idiosyncratic factors, as well as the determinants that underpin fluctuations in international trade flows across different regions of the world. Our analysis starts by using a Bayesian dynamic latent factor model (BDFM) to simultaneously estimate the four dynamic factors, followed by the application of Bayesian model averaging to identify the variables that explain the shares of variance. Our key findings are: (i) international factors are the most important in explaining fluctuations in international trade, suggesting that the interconnections between economies, and policies/shocks at the regional and global level, tend to be more important than country-level factors (ii) regional integration, particularly when the agreement goes beyond trade in goods, is positively related to the share of the regional factor, and inversely related to the importance of the global factor. Furthermore, the regional factor is more important in the case of economically large trade blocks. Overall, our analysis illustrates the usefulness of applying a BDFM model to study the co-movements of international trade series.

KeywordsBayesian dynamic latent factor model
Bayesian model averaging
regional trade agreements
JournalCanadian Journal of Economics
Journal citation57 (1), pp. 331-358
ISSN1540-5982
0008-4085
Year2024
PublisherWiley
Publisher's version
License
CC BY 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1111/caje.12702
Publication dates
Published online01 Feb 2024
FunderNarodowe Centrum Nauki

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