Long Live Globalization: Geopolitical Shocks and International Trade

October 27, 2023

Preview Citation

Format: Chicago

Serhan Cevik. Long Live Globalization: Geopolitical Shocks and International Trade, (USA: International Monetary Fund, 2023) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Are we really witnessing the death of globalization? A multitude of shocks over the past three years has unsettled the conventional wisdom on economic integration and fueled widespread calls for protectionist and nationalist policies. Using an extensive dataset with more than 4 million observations, I develop an augmented gravity model of bilateral trade flows among 59,049 country-pairs over the period 1948–2021 and find that the much-debated geopolitical alignment between countries has contradictory and statistically insignificant effects on trade, depending on the level of economic development. Moreover, the economic magnitude of this effect is not as important as income or geographic distance and it diminishes significantly when extreme outliers are removed from the sample. The empirical analysis presented in this paper also confirms that the level of income in both origin and destination countries has a positive impact on trade, while the greater the distance between countries, the smaller the flow of bilateral trade due to higher trade costs. Cultural similarities and historical ties are also important in shaping trade flows, just like trade agreements that tend to lead to higher level of international trade.

Subject: Econometric analysis, General Agreement on Tariffs and Trade, Globalization, Gravity models, International trade, Plurilateral trade, Trade balance

Keywords: Country pair, General Agreement on Tariffs and Trade, Geopolitics, Global, Globalization, Gravity model, Gravity models, International trade, Plurilateral trade, Statistics database, Trade balance, Trade globalization, Trade openness, Trade pattern

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/225
Stock No:

WPIEA2023225
ISBN:

9798400258169
ISSN:

1018-5941

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