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Trade network reconstruction and simulation with changes in trade policy

Author

Listed:
  • Yuichi Ikeda

    (Kyoto University)

  • Hiroshi Iyetomi

    (Niigata University)

Abstract

The interdependent nature of the global economy has become stronger with increases in international trade and investment. We propose a new model to reconstruct the international trade network and associated cost network by maximizing entropy based on local information about inward and outward trade. We show that the trade network can be successfully reconstructed using the proposed model. In addition to this reconstruction, we simulated structural changes in the international trade network caused by changing trade tariffs in the context of the government’s trade policy. The simulation for the FOOD category shows that import of FOOD from the US to Japan increase drastically by halving the import cost. Meanwhile, the simulation for the MACHINERY category shows that exports from Japan to the US decrease drastically by doubling the export cost, while exports to the EU increased.

Suggested Citation

  • Yuichi Ikeda & Hiroshi Iyetomi, 2018. "Trade network reconstruction and simulation with changes in trade policy," Evolutionary and Institutional Economics Review, Springer, vol. 15(2), pages 495-513, December.
    • Handle: RePEc:spr:eaiere:v:15:y:2018:i:2:d:10.1007_s40844-018-0110-0
    DOI: 10.1007/s40844-018-0110-0
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    References listed on IDEAS

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    Cited by:

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    2. Wang, Xingxing & Li, Huajiao & Zhu, Depeng & Zhong, Weiqiong & Xing, Wanli & Wang, Anjian, 2021. "Research on global natural graphite trade risk countermeasures based on the maximum entropy principle," Resources Policy, Elsevier, vol. 74(C).
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    More about this item

    Keywords

    International trade network; Entropy maixmization; Network reconstruction;
    All these keywords.

    JEL classification:

    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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