Essays on the Effect of GATT/WTO and Financial Crisis on International Trade

The whole thesis consists of three chapters. In chapter 1, I develop a Bayesian estimation method for inferring a dynamic panel data gravity model. My method deals with the many zeros problem and at the same time allows for lagged dependent variables and multiple sets of unobserved effects. I apply the Bayesian estimation algorithm to re-examine the effect of GATT/WTO membership on trade. I find that my dynamic gravity model fits the data better than the static version of the same model, and trade ow in the previous period has a large and positive effect on trade flow in the current period. I also find that GATT/WTO membership does not appear to have an effect on trade flow. This result is consistent with the findings by Rose (2004), but not with those of Liu (2009), who uses the same dataset. This shows the importance of including lagged dependent variables and multiple sets of unobserved effects in gravity model estimation.;In chapter 2, I develop a method to estimate a dynamic gravity model with multiple sets of unobserved effects, with only the conditional mean assumption for the dependent variable. My method deals with the many zeros problem and allows for lagged dependent variables and time-varying exporter and importer fixed effects as well as time-invariant country-pair fixed effects. I find that trade flow in the previous period still has a large and positive effect on trade ow in the current period after controlling for multiple sets of unobserved effects.;In chapter 3, I investigate the impact of a banking crisis on international trade in services. Many studies have tried to explain how a banking crisis affects international trade flows. However, despite the growing importance of services trade, the existing literature has focused on the impact of banking crises on goods trade. This is because, until recently, no internationally comparable bilateral services trade data were available to measure the effects of such crises. The OECD now provides bilateral services trade data, and it is thus possible to examine the effect of the recent global crisis on services trade. Because there is heterogeneity within services, I hypothesize that the exporter's and importer's banking crises affect each services sector's trade differently find that both the exporter's and the importer's banking crises have a negative effect on goods-related services trade, such as other commercial services trade and transportation services trade. However, there is no significant effect of banking crises on travel services trade.