I have been following your researches, because they cover partly my area of scientific research interest? The international trade was mainly reorganized during and after the second World War, although ancient times and afterwards long colonial history shaped trade paths that remained as a heritage of the trade roads.
Since 2015 I have been deeply analysing the Belt and Silk Road Initiative and the AIIB establishment (already in 2015 as a competitive solution to TPP Trade Deal of the US and 11 other Pacific Rim nations). Unfortunately TPP was abandoned by US and is being revamped, now. (The TPP part is not my strength)
More important from my point of research is to find out the key expansion goals of China or rather empirically verify my thesis about long term process of internationalization, which in my perception is the final stage of China's attendance in globalization - mean World supremacy.
I am not judging positive and negative aspects of that process, at least at this stage, but I am trying to verify macroeconomic drivers of such decisions, apart from political once. In my opinion the New Silk Road project, supported by various financial means (solely Chinese or more complex international), due to its scale is comparable with the Marshall Plan that created Western countries' economies after the Second World War and which set economic global connection, existing till present times.
The second part of my scientific research is focused more towards the AIIB itself and perspectives of its role, towards internationalisation of RMB, at least in investment settlements and then in trade once. The ultimate question is whether China wants to internationalize RMB and if yes whether its economy is ready for that. This question is important in relation to the establishment of clearing offices around the World and relatively tiny share of RMB in trade deals clearance. Most of them is cleared in USD.
Bearing the above in mind I would like to ask you the following questions:
1. What are the main goals of your project: "International trade"?
2. Are you planning to utilize gravity model?
3. What scope will it have? Asia-Pacific Rim?
4. Are you in the process of setting up a team? I would like to participate.
I want to ask Karol Piekarz why he is considering to use gravity model. As a theory of international trade, it is a very coarse one. Distance, if it is measured as a spacial one, is so rigid and cannot reflect any changes of economic conditions of both nations.
Are you in the process of setting up a team? I would like to participate.
Dear Yoshinori Shiozawa , you are right, however please note that the spacial distacne is basic/core measurement for distance used in gravity models. The distance can be defined as more sophisticated one, like - lets me call it - culture distance between nations/countries and group of factors like i.e: language, political system, international organisations (WTO, OECD, ASSEAN, ...) etc. In other words, I would say countries used common language and have common political system are much closer rather than those with different ones. As a result of this approach, the distance is more varied, which is preferable for econometric models.
I am fully agreed to note Bartosz Krapinski that it will give a new dimension in the analysis of gravity models and guide the researcher in the right direction .
I wonder why Karol Piekarz does not reply himself.
Dear Bartosz Krapinski
Thank you for your comment. I know that you have freedom to readjust the "distance" between countries to a more "sophisticated" measure. I posed that question only to express most simple problem of the model. However, the gravity model has many other deficiencies as a trade model.
When I wrote that gravity model "is a very coarse one", I was saying that gravity model uses the same "distance" are all common for any industry, but as you can easily see that the ratio of trade and transport costs differs enormously and it would be difficult to characterize competitiveness of a product of a nation simply by distance.
Now, we have much more refined theory than gravity model. Please see Section 9 of my paper:
https://www.researchgate.net/publication/304717720_The_New_Theory_of_International_Values_An_Overview
The new theory of international values is a model of international trade for M-county, N-product economy with choice of production techniques. It is also a unique theory that can treat input trade (trade of input goods) which is now the vital or essential elements of international trade. For example, a global value chain is a network of input trade. Four generations of trade theory (Ricardian, HOS, New and New New trade theories) cannot deal with input trade. The first three theories simply exclude input trade (or intermediate goods) by assumption, whereas the fourth is a theory of a nation that trade with the world and does not analyze a simple situation that exported parts or components from country A to B changes the cost of a product in B and became competitive to the same product produce in A.
Gravity model is only accepted as relevant model of international trade after the failure of Heckscher-Ohlin-Vanek models revealed to be a complete failure in 1990’s. It is often explained that Eaton and Kortum model presents a theory why the gravity model is justified. On this point, please see my question and discussion there:
https://www.researchgate.net/post/Why_did_Eaton_and_Kortum_model_perform_so_badly )p.push(n[j]);p.length>1&&p.sort(function(a,b){var c=0;retu
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Yoshinori Shiozawa
Osaka City University
I have posted the last "answer" to this discussion page. It is quite strange that nobody added or responded afterwards.
Theory of international trade is as old as classical political economy. Policy questions were one of main purpose for developing economic theories. IN spite of this fact, theories of international trade is least developed mainly because they are analytically difficult. Many professional economists even today draw on simple 2-country, 2-commodity model (either Ricardian or Heckscher-Ohlin-Samuelson model). What is more astonishing is that many heterodox economists, who normally claim the fatal error of neoclassical economics, argue in terms of HOS model. They may not acknowledge what they are doing. We should now know that all argument based on factor intensity or factor abundance is only supportable by HOS theory. If we change to generalized Ricardian trade theory, no such thing can be said.
Now we are in the age of global competition. Whether we have a good theory of international trade or not is really crucial to the correct and deep understanding what is happening in the economy. The new theory of international values may seem difficult at first, but once you have mastered the theory, you will surely know that it is much superior than the traditional trade theories.
If the "Overview" paper cited in my last post 6 months ago, my new paper with Fujimoto may be more easier to read, because it is written for management science researchers.
Shiozawa and Fujimoto (2018) The Nature of International Competition Among Firms. In Fujimoto and Ikuine (eds.) Industrial Competitiveness and Design Evolution. Springer Japan, Tokyo. Chapter 2, pp.43-96.
If readers of this page want to read it and have no availability to read it , please ask me. I can send them my personal copy.
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