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Martínez-Zarzoso, Inmaculada
Nowak-Lehmann D., Felicitas
Horsewood, Nicholas
Year of Publication: 
Series/Report no.: 
Discussion papers // Ibero America Institute for Economic Research 149
This paper evaluates the static effects of preferential agreements between several economic blocs and areas using a dynamic gravity equation. The main aim is to investigate whether regionalism has fostered intra or/and extra blocs international trade, taking into account the existence of heterogeneity over time and across countries and testing whether a dynamic model is preferred to the traditional static specification of the gravity model. This paper argues that the gravity model should be best estimated using Blundell and Bond’s (1998) system-GMM estimator. This procedure remedies some econometric problems such as regressor endogeneity, measurement error and weak instruments, and controls for timeinvariant country-specific effects such as distance or common language.
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Working Paper

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