Hello,
I am currently working on a paper that investigates the trade creating and trade diverting effect of the FTA between Australia and Chile enforced in 2009.
My issue is the precise methodology doing so.
I plan to use equation (3) provided by Magee (2008) but a colleague of mine noted that in order to follow through I would need data on tradeflows between counties that are not part of the FTA in question.
Why is that and how do I address this issue?
Looking forward to hearing your suggestions.
PM
Your question is very interesting. The problem deserves attention. Indicate which factors you will include in the model. The gravitational model includes the factors common languages,common legal systems, common currencies, etc., as well as the distance between them, etc.
You should add some dummies to represent the FTA.
See how to do here: Preprint International trade and the gravity model: recent evidence i...
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