Geopolitics and International Trade: The Democracy Advantage
IMF Working Papers, February 2, 2024
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- Geopolitics and International Trade: The Democracy Advantage
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Bibliographic details
- Authors: Serhan Cevik
- Published: February 2, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400266393.001
Research question and scope
- Do political regimes determine how geopolitics influence international trade?
- Dataset: more than 4 million observations on 59,049 country-pairs over the period 1948–2018.
- Coverage: bilateral trade flows across a global sample spanning 1948–2018.
Methodology
- Model: augmented gravity model of bilateral trade flows.
- Estimation techniques:
- Poisson Pseudo-Maximum Likelihood regression.
- Two-stage least squares with instrumental variable approach.
Key empirical findings
- Geopolitical developments are not as important as income and geographical distance in determining bilateral trade flows.
- Democracy fosters international trade.
- Democracy moderates the potential negative impact of geopolitics on trade.
- The impact of democracy and its interaction with geopolitical distance are significant across all countries.
- The magnitude of democracy’s effects is substantially larger in advanced economies than in developing countries, reflecting the greater strength of democratic institutions, on average, in advanced economies.
Subjects and keywords
- Subjects: Econometric analysis, General Agreement on Tariffs and Trade, Globalization, Gravity models, International trade, Plurilateral trade, Trade balance.
- Keywords: country pair, democracy, democracy advantage, destination countries help, General Agreement on Tariffs and Trade, Geopolitics, Global, gravity model, Gravity models, impact of democracy, international trade, Plurilateral trade, Trade balance, trade globalization.
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- Working Paper