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Trade Between Euro Zone and Arab Countries: a Panel Study

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  • Harb, Nasri

Abstract

We construct an aggregate data panel to estimate price and income elasticities of the Arab countries imports from and exports to euro zone. We study the non-stationarity of our series and verify the cointegration hypothesis among the variables using Pedroni's heterogeneous panel cointegration tests (2004). The panel data circumvent the problem of short span sample and increase the power of the non stationarity tests. Then, we estimate the idiosyncratic and panel cointegrating vectors using DOLS (Kao and Chiang, 2000), FMOLS (Phillips and Hansen, 1990) and group-mean DOLS and FMOLS developed by Pedroni (2000, 2001). Our variables are shown to be cointegrated. Arab imports from Euro zone countries are income inelastic, but price elastic. Results of export function are not conclusive and depend on the used estimator.

Suggested Citation

  • Harb, Nasri, 2006. "Trade Between Euro Zone and Arab Countries: a Panel Study," MPRA Paper 13675, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:13675
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    References listed on IDEAS

    as
    1. Chihwa Kao & Min‐Hsien Chiang & Bangtian Chen, 1999. "International R&D Spillovers: An Application of Estimation and Inference in Panel Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 691-709, November.
    2. Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, 2004. "Some cautions on the use of panel methods for integrated series of macroeconomic data," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 322-340, December.
    3. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    4. Nasri Harb, 2004. "Money demand function: a heterogeneous panel application," Applied Economics Letters, Taylor & Francis Journals, vol. 11(9), pages 551-555.
    5. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
    6. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    7. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers 2000-02, Department of Economics, Williams College.
    8. Quah, Danny, 1994. "Exploiting cross-section variation for unit root inference in dynamic data," Economics Letters, Elsevier, vol. 44(1-2), pages 9-19.
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    14. Alkhatib Alkswani, Mamdouh & Al-Towaijari, Hamad A., 1999. "Cointegration, Error Correction and the Demand for Money in Saudi Arabia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 52(3), pages 299-308.
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    17. Peter C.B. Phillips, 1992. "Hyper-Consistent Estimation of a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 1040, Cowles Foundation for Research in Economics, Yale University.
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    21. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    22. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
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    Cited by:

    1. Güzin Bayar, 2022. "Turkey's sectoral exports: A competitiveness approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2268-2289, April.
    2. James J. Forest & Paul Turner, 2013. "Alternative estimators of cointegrating parameters in models with nonstationary data: an application to US export demand," Applied Economics, Taylor & Francis Journals, vol. 45(5), pages 629-636, February.
    3. Chiu, Yi-Bin & Lee, Chien-Chiang & Sun, Chia-Hung, 2010. "The U.S. trade imbalance and real exchange rate: An application of the heterogeneous panel cointegration method," Economic Modelling, Elsevier, vol. 27(3), pages 705-716, May.
    4. Güzin Bayar, 2018. "Estimating export equations: a survey of the literature," Empirical Economics, Springer, vol. 54(2), pages 629-672, March.

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    More about this item

    Keywords

    Imports; Exports; Time series; Panel Cointegration; DOLS; FMOLS;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F30 - International Economics - - International Finance - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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