The Research Of OECD Countries' Bilateral Trade Based On Gravity Model And Stable Difference Method

The study of international bilateral trade has always been the priority research area of economics.The research methodologies are mainly divided into mathematical research,ex-ante analysis and an-post analysis.All of those three methodologies has their own advantages and disadvantages.The an-post analysis methodology using historical data to fit a formula of some economy factors and it can use the fitted formula to predict some future values of some economy factors,so it become the most mainstream methodology.And its most representative method is the gravity model.Although,gravity model can perfectly fit those historical data,economist merely to explain why gravity model is useful in a mathematical way.The main purpose of this paper is to explain the rationality of gravity model by using a derived mathematical method which named stable difference method.And use many real bilateral trade data to validate the proof.at last,this paper will use the stable difference method to fit a gravity model to get more reliable parameters estimation.The study of international bilateral trade has always been the priority research area of economics.The research methodologies are mainly divided into mathematical research,pre-analysis and postmortem analysis.These methods have advantages and disadvantages.Postmortem analysis will be used in the paper on studying China's bilateral trade.Specifically,gravity model will be further extended to get a more abundant one.The gravity model utilizes a physical gravitation to build the model,economists believe that the bilateral trade between the two countries is proportional to GDP and population,while inverse proportional to the distance.On this basis,there are some extended gravity model,which is mainly to add some other explanatory variables such as whether the common border,a common language and so on.These models constantly add some relevant variables to improve the model's ability to explain.And the log after these extensions of the goodness of fit of the model(R^2)are general y more than 0.9,which explains the 90% variation of the volume of bilateral trade after Logarithmic.However,extended gravity model rarely explores whether the current linear structure is the most correct structure.Perhaps the volume of bilateral trade doesn't have linear correlation with each of the explanatory variables,maybe an interaction of some variables existed.On the basis of the gravity model,this paper attempts to utilize the structure of collaborative filtering algorithm and innovative algorithms to dig better structural of gravity model.By using empirical data to verify the reasonableness of innovative algorithms,then innovative ways to re-modeling of gravity,gain in a more reasonable coefficient estimates.The structure and conclusions of this paper can be summarized as follows: the first chapter is manly about the research background and the research purpose of this paper.After that,this chapter also write literature review of many classical papers.The second chapter is manly about the system statement about those relevant theory and doing the mathematical derivation about this paper's innovation points which will give supports for the follow chapters' empirical research.The third and fourth chapters are the empirical research parts.The research data is getting from the OECD.org and comtrade.un.org websites.So model data is truth and reliable.After get the data,I will construct a highly fitted model by using the innovation methods of this paper.And give the proof about the linearity of the bilateral trade.After that,I will use those methods to get a better gravity model and get better parameters' estimation.At last this paper will list some insufficient points and some further research direction.The innovation points of this paper are: firstly,the classical econometric model is a single object model.Which means an observation is an object.The object's features determine its dependent variable's value.For example,in gravity model,the bilateral trade is determine by two countries' GDP,population,exchange rate and so on.But in this paper,some features' value can be delete by differential.For example,the trade value of France and American minus the trade value of China and American can delete the influence of some features.Secondly,the classical econometric model using those independent variable to estimate the dependent variable,but the new method can using the dependent variables to estimate those independent variables' value.