RG Members
I am dealing with gravity model of trade. According to the latest version of gravity to control for multilateral resistance, I should generate different fixed effects e.g. (Importer, exporter, time, pair id) fixed effects. I am using Stata 13.
What is the easiest way to create these effects or is there any other way to control for Multilateral resistance factor in gravity model.
waiting for your answers.
Best wishes,
Hi Muhammad, you want to be sure that the model is correctly specified, e.g., that there are fixed effects for importer, exporter, etc. the data need to be organised to a panel such that each row is an observation on an individual unit ((e.g., exporter and importer), and then time (e.g., year). you then tell STATA iis (i is the unit index) (varname for this index), and tis (time index) var, and use the XTREG command. alternatively, if the number of i's isn't too large, just use a dummy variable.
Muhammad. To create importer, exporter, time effects in panel data, you will have to generate dummies for these variables.
Dear Gregory and Eliud
Thank you for your reply. I am taking China's trade with 132 countries over period 1993-2014 and my Equation is
Total trade= constant+(GDPi*GDPj)+ (Diff.Per Capita GDPij)+ Distance+ Bilateral_Exchang_erates+ {Dummies (Language+WTO+FTA+Border+ landlock)
OLS results are good but when i take country fixed effects then most of the variable gone insignificant and opposite signs that is totally wrong.
But if i take only Time fixed effects then most of the variables appeared with expected signs. I just wants to know it is okay to take only time fixed effects to control for multilateral resistance or other issue as mentioned in latest gravity calculations.
10th Oct, 2018
Sandeep Kaur Bhatia
Central University of Punjab
through dummies
12th Dec, 2018
Member One
University
Muhammad Saqib Irshad do you assume that the 132 other countries also trade within each other?
Can you help by adding an answer?
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