Sucharita Ghosh

Are regional trading arrangements trade creating?: An application of extreme bounds analysis

In this study, we use extreme bounds analysis to test the robustness of the hypothesis that regional trading arrangements (RTAs) are trade creating. Extreme bounds analysis provides a more rigorous test of specification uncertainty than traditional econometric theory by incorporating prior information and using a systematic approach to testing the fragility of coefficient estimates. The results show that the trade creation effect of most RTAs is fragile. Using a least squares estimator where all weight is attached to the sampling distribution, eight or more of the twelve RTAs considered are found to be trade creating. When the relative weight in the estimation is shifted from the sampling to the prior distribution, the number of RTAs that are trade creating falls to six at the 95 percent likelihood ellipsoid. Moreover, when we specify that not all RTAs are trade creating, four RTAs increase trade at the 95 percent likelihood ellipsoid. At the extreme bounds, when all weight is attached to the prior distribution, none of the RTAs are found to be trade creating. As a result, we conclude that the pervasive trade creation effect found in the literature reflects not the information content of the data but rather the unacknowledged beliefs of the researchers.

A Sensitivity Analysis of the Gravity Model

Abstract In this article, we examine the robustness of variables used in the gravity model literature. We use a variant of Leamers extreme-bounds analysis, which tracks the sign and significance level of the variable of interest to changes in the conditioning set of variables. Of the 47 variables investigated, we find 20 measuring level of development, trade policy, linguistic and colonial ties, geographic factors, relative population density, common currency, and membership in the Central American Common Market (CACM), Caribbean Community (Caricom), Mercado Común del Sur (Mercosur), Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA), and Asian Pacific Economic Cooperation (APEC) are robustly linked to trade. As a result, this study provides researchers with a suitable starting point in which to examine new potential determinants of international trade.

Using Electronic Response Systems in Economics Classes

Abstract College instructors and students participated in a pilot project at the University of Akron to enhance student learning through the use of a common teaching pedagogy, peer instruction. The teaching pedagogy was supported by the use of technology, an electronic personal response system, which recorded student responses. The authors report their experiences in using this technology-enhanced teaching pedagogy and provide another example of an active and collaborative learning tool that instructors can use to move beyond “chalk and talk.” Preliminary survey results from students participating in this pilot project are also reported.

Does the Confucius institute impact international travel to China? A panel data analysis

This article examines the impact of Confucius Institutes on inbound travel to China. We estimate a panel gravity model of inbound tourism flows to China between 2004 and 2010. We use a Poisson pseudo-maximum likelihood estimator to control for heteroscedasticity endemic in gravity models (Santos Silva and Tenreyro, 2006). We find that the presence of Confucius Institute(s) in the source country increases overall tourism in general and business and worker tourists in particular.

Cross‐Border Economic Activities, Human Capital and Efficiency: A Stochastic Frontier Analysis for OECD Countries

We study the growth effects of outward‐oriented economies by using stochastic frontier analysis to measure the efficiency externalities of three forms of economic cross‐border activities – international trade, foreign direct investment (FDI) and migration – for OECD countries. The study also examines whether the efficiency of these cross‐border activities is affected by the level of human capital in the host country. We find that international trade and FDI are important channels for improving efficiency, as is human capital accumulation, and that the positive effects of international trade, FDI, and migration depend crucially on the level of accumulated human capital. Our results show that the impact of human capital is important for increasing efficiency via international trade flows and FDI flows, while immigration into countries that are richer in human capital enhances their efficiency relatively more than immigration into countries with lower human capital. These results remain robust to alternate measures of human capital, controls on education levels among immigrants, and to a non‐parametric estimation of the model.

THE CASUAL RELATIONSHIP BETWEEN INTERNATIONAL TRADE AND EMPLOYMENT IN THE MANUFACTURING SECTOR OF THE UNITED STATES

This article investigates the relationship between international trade and employment in the manufacturing sector of the U.S. for 1961?1995. Testing for a statistical relationship between employment in the manufacturing sector and the trade deficit is done in three steps. The first step checks for the order of integration of the variables, the second step uses the Engle?Granger method to test for cointegration, and the third step involves a vector error correction model to address the causality issue between employment in the manufacturing sector and the trade deficit. The empirical evidence in this article supports the view that there is a long-run relationship between employment and net imports in manufactured goods. In addition, unidirectional Granger causality is found from net imports to employment. Results from the sectoral disaggregation, however, yielded mixed results, which shows that during this period increasing trade revealed the comparative disadvantage of some sectors of U.S. manufacturing.

United States Trade Balance Announcements: The Nature of its Data Revisions

This paper examines the nature of the data revisions in the monthly United States trade balance announcements made by the Commerce Department. Previous work in this area have considered agent reactions to only the preliminary trade balance announcements on various asset prices and have not taken into account the revised figures of the previous months trade balance announcement. Since Ghosh and Lien (1995) found that the revisions in the data announced by the government are taken into account by the agents, it leads us to further investigate the nature of these revisions. This paper uses the econometric approach described in Mankiw, Runkle and Shapiro (1984) and Mork (1990) to analyze whether the revisions in the US trade balance announcements represent measurement errors, efficient forecast errors, or inefficient forecast errors. Using the generalized method of moments estimation procedure the researcher finds that the preliminary announcements of the trade balance data are better characterized as observations of the true series measured with error rather than as efficient forecasts. The results are of interest to the users of these preliminary US trade balance announcements since it suggests to them that they could use statistical procedures to estimate the underlying value and thus obtain more efficient estimates of these government announcements.

Forecasting with preliminary data

This paper examines several methods to forecast revised US trade balance figures by incorporating preliminary data. Two benchmark forecasts are considered: one ignoring the preliminary data and the other applying a combination approach; with the second outperforming the first. Competing models include a bivariate AR error-correction model and a bivariate AR error-correction model with GARCH effects. The forecasts from the latter model outperforms the combination benchmark for the one-step forecast case only. A restricted AR error-correction model with GARCH effects is discovered to provide the best forecasts.

The Relationship between Communicable Diseases and FDI Flows: An Empirical Investigation

This paper focuses on the impact of communicable diseases, which affects the population health component of human capital on worldwide FDI flows. The model controls for endogeneity that can stem from the interconnected relationship between FDI, population health and per capita GDP. After controlling for this endogeneity, we find that communicable diseases have a statistically significant negative effect on FDI, which is 2 to 5 times larger than when using ordinary least squares. The results remain robust to alternative model specifications.

Technology in Support of Good Pedagogy: Electronic Response Systems and Peer Instruction in an Economics Classroom

College instructors and students participated in a pilot project at The University of Akron to enhance student learning through the use of a common teaching pedagogy, peer instruction. Peer instruction is a teaching pedagogy which can be used to engage students through activities that require each student to apply the core concepts being presented and then to explain these concepts to their fellow students. The teaching pedagogy was supported by the use of technology, an electronic response system, which recorded student responses. We report our experiences in using this technology enhanced teaching pedagogy and provide another example of an active and collaborative learning tool that instructors can use to move beyond chalk and talk. Preliminary results from student and instructor surveys are also reported.