Monthly Archives: February 2015

GRAVITY WITH GRAVITAS: McCallum’s gravity equation

Two factors contribute to making McCallum’s ceteris paribus ratio of interprovincial to province-state trade so large. First, his estimate is based on a regression with omitted variables, the multilateral resistance terms. Estimating McCallum’s regression for 1993 data we find a … Continue reading

Posted in Gravity model | Tagged , | Leave a comment

GRAVITY WITH GRAVITAS: Macroeconomic analysts

While gravity equations used in empirical applications are known for their strong fit to the data, the estimated equations do not correspond to those derived theoretically. The theory, first developed by Anderson [1979], tells us that after controlling for size, … Continue reading

Posted in Gravity model | Tagged , | Leave a comment

GRAVITY WITH GRAVITAS

ABSTRACT The gravity model has been widely used to infer substantial trade flow effects of institutions such as customs unions and exchange rate mechanisms. McCallum [1995] found that the US-Canada border led to trade between provinces that is a factor … Continue reading

Posted in Gravity model | Tagged , | Leave a comment