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Tools for reconstructing the bilateral trade network: a critical assessment

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  • Tiziano Distefano
  • Marta Tuninetti
  • Francesco Laio
  • Luca Ridolfi

Abstract

This study critically assesses the performances of the Gravity Model (GM) and of the RAS algorithm for the bilateral flow intensity estimations and link prediction. The main novelty is the application of these methodologies to reconstruct the network topology with a minimum amount of information. Moreover, we implement a multi-layer analysis to provide a comprehensive and robust framework, by testing several food commodities, over the period 1986–2013. The main outcomes suggest that the RAS algorithm outperforms the Gravity Model in the estimations of the bilateral trade flows, importantly guaranteeing the balance constraints (i.e. global import equals global export), while GM generates lower relative errors, but it underestimates total global flows. Both RAS and GM can be applied to accurately recover the network architecture. The implications of our study encompass a wide range of applications: systemic-risk assessment, creation of new databases, and scenario analyses to support policy decisions.

Suggested Citation

  • Tiziano Distefano & Marta Tuninetti & Francesco Laio & Luca Ridolfi, 2020. "Tools for reconstructing the bilateral trade network: a critical assessment," Economic Systems Research, Taylor & Francis Journals, vol. 32(3), pages 378-394, July.
    • Handle: RePEc:taf:ecsysr:v:32:y:2020:i:3:p:378-394
    DOI: 10.1080/09535314.2019.1703173
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    Cited by:

    1. Distefano, Tiziano & D’Alessandro, Simone, 2023. "Introduction of the carbon tax in Italy: Is there room for a quadruple-dividend effect?," Energy Economics, Elsevier, vol. 120(C).
    2. Jinran Chen, 2024. "Prediction of global trade network evolution with uncertain multi-step time series forecasting method," Fuzzy Optimization and Decision Making, Springer, vol. 23(3), pages 387-414, September.
    3. Bai, Xiao & Hu, Xiaoqian & Wang, Chao & Lim, Ming K. & Vilela, André L.M. & Ghadimi, Pezhman & Yao, Cuiyou & Stanley, H. Eugene & Xu, Huji, 2022. "Most influential countries in the international medical device trade: Network-based analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 604(C).
    4. Ageliki Anagnostou & Pawel Gajewski, 2021. "Multi-Regional Input–Output Tables for Macroeconomic Simulations in Poland’s Regions," Economies, MDPI, vol. 9(4), pages 1-19, October.

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