Effect of World Trade Centrality Indicators on Economic Growth: the Approach of Weighted Complex Networks (Case Study: Chosen Countries of Asia and CIS)

Lali, Mohammadreza; Daei-Karimzadeh, Saeed; Karimi, Farzad

doi:10.30473/egdr.2023.65067.6565

Document Type : ORIGINAL ARTICLE

Authors

¹ . PhD Student, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

² Associate Professor, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

³ Associate Professor, Department of Management, Mobarekeh Branch, Islamic Azad University, Mobarekeh, Iran.

https://doi.org/10.30473/egdr.2023.65067.6565

Abstract

Recent studies on complex networks in international trade show the number of partners; trade intensity, indirect trade connections and the central position of each partner in the trade network have significant effects on economic growth. The network analysis approach in investigating the effect of trade on economic growth, unlike conventional methods, can identify and measure indirect trade relations (intermediary countries in trade) in international interactions. This research aims to investigate world trade centrality indicators’ effects on economic growth using panel data of 42 chosen countries of Asia and CIS, in two steps. At first, the weighted directional matrices of trade were made and then the centrality indices of the countries were calculated for the selected years according to a complex network approach. Then the effect of the aforementioned indices as an explanatory variable of trade on economic growth has been investigated, and these were compared with the effect of the trade openness ind
ex.The results of the research show that compared to the conventional indicator of the trade openness index, the centrality indicators of the world trade network show a better explanation of economic growth while having more effect. Among these, the closeness centrality (due to having a core role in the network and the entanglement of trade relations) and the eigenvector centrality (due to establishing relationships with countries that are connected with important partners in the network) have more effects on economic growth.

Keywords

References

Abrishami, H., Mehrara, M. & Tamadonnejad, A. (2009). “The Relationship between the Foreign Trade and Economic Growth: GMM Approach”. Journal of Knowledge and Development, 16(26), 44-62 (In Persian).

Albert, R. & Barabási, A. L. (2002). “Statistical Mechanics of Complex Networks”. Reviews of Modern Physics, 74(1), 47–97.

Baltagi, B. H. (2005). “Econometric Analysis of Panel Data”. Third Edition, Wiley Publisher.

Baskaran, T., Blochl, F., Bruck, T. & Fabian, J. T. (2011). “The Heckscher–Ohlin Model and the Network Structure of International Trade”. International Review of Economics and Finance, 20(2), 135-145.

Bhattacharya, K., Mukherjee, G., Sarämaki, J., Kaski, K. & Manna, S. (2008). “The International Trade Network: Weighted Network Analysis and Modeling”. Journal of Statistical Mechanics: Theory and Experiment, 2008(02), P02002.

Cameron, A. C. & Trivedi, P. K. (2009). Microeconometrics Using Stata, College Station, Texas, StataCorp LP.

Deguchi, T., Takahashi, K., Takayasu, H. & Takayasu, M. (2014). “Hubs and Authorities in the World Trade Network Using a Weighted HITS Algorithm”. PloS one, 9(7), e100338.

Easley, D. & Kleinberg, J. (2010). “Networks Crowds and Markets: Reasoning about a Highly Connected World. Cambridge: Cambridge University Press.

Eris, M. N. & Ulasan, B. (2013). “Trade Openness and Economic Growth: Bayesian Model Averaging Estimate of cross-Country Growth Regressions”. Economic Modelling, 33, 867-883.

Fagiolo, G., Rayes, J. & Schiavo, S. (2008). “On the Topological Properties of the World Trade Web: A Weighted Network Analysis”. Physica A: Statistical Mechanics and its Applications, 387(15), 3868-3873.

Fagiolo, G., Reyes, J. & Schiavo, S. (2010). “The Evolution of the World Trade Web: a Weighted-Network Analysis”. Journal of Evolutionary Economics, 20(4), 479-514.

Fan, Y., Ren, S., Cai, H. & Cui, X. (2014). “The State's Role and Position in International Trade: A Complex Network Perspective”. Economic Modelling, 39, 71-81.

Fenira, M. (2015). “Trade Openness and Growth in Developing Countries: An Analysis of the Relationship after Comparing Trade Indicators”. Asian Economic and Financial Review, 5(3), 468-482.

Garlaschelli, D. & Loffredo, M. L. (2005). “Structure and Evolution of the World Trade”. Physica, 355, 138–144.

Goyal, S. (2007). Connections: An Introduction to the Economics of Networks. Princeton, NJ, Princeton University Press.

Greenaway, D., Morgan, W. & Wright, P. (2002). “Trade Liberalization and Growth in Developing Countries”. Journal of Development Economics, 67(1), 229-244.

Grossman, G. & Helpman, E. (1991). Innovation and Growth in the Global Economy, MIT Press, Cambridge, MA.

Hoechle, D. (2007). “Robust Standard Errors for Panel Regressions with Cross-Sectional Dependence”. The Stata Journal, 7(3), 281-312.

Kali, R., Mendez, F. & Reyes, J. )2007). “Trade Structure and Economic Growth”. Journal of International Trade and Economic Development, 16(2), 245-269.

Kali, R. & Reyes, J. (2007). “The Architecture of Globalization: A Network Approach to International Economic Integration”. Journal of International Business Studies, 38(4), 595- 620.

Liao, H. & Vidmer, A. (2018). “A Comparative Analysis of the Predictive Abilities of Economic Complexity Metrics Using International Trade Network”. Complexity , Article ID 2825948, doi:10.1155/2018/2825948.

Jackson, M. O. (2008). “Social and Economic Networks, Princeton, N J: Princeton Univ.

Mehnatfar, U., Osmani, F., Cheshomi, M. & Aghar, L. (2023). “Do the Development of Technology and the Expansion of trade Reduce the Ecological Footprint? A Case Study: Evidence from Developing Countries”. Economic Growth and Development Research, 13(52), 95-108 (In Persian).

Najarzadeh, R. & Biabany Khameneh, K. (2019). “The Topology of International Fuel Trade Network and Iran’s Stance in this Network”. Quarterly Journal of Energy Policy and Planning Research, 4(4), 41-66 (In Persian).

Newman, M. E. (2010). Networks: An Introduction. Oxford, United Kingdom: Oxford University Press.

Önder, A. S. & Yilmazkuday, H. (2016). “Trade Partner Diversification and Growth: How Trade Links Matter”. Journal of Macroeconomics, 50, 241-258.

Pesaran, M. H. (2007). “A Simple Panel Unit Root Test In The Presence Of Cross-Section Dependence”. Journal of Applied Econometrics, 22, 265–312.

Piccardi, C. & Tajoli, L. (2012). “Existence and Significance of Communities in the World Trade Web”. Physical Review E, 85(6), 066119.

Picciolo, F., Squartini, T., Ruzzenenti, F., Basosi, R. & Garlaschelli, D. (2012). “The Role of Distances in the World Trade Web”. In 2012 Eighth International Conference on Signal Image Technology and Internet Based Systems (pp. 784-792). IEEE.

Rafat, M. (2018). “The Application of Complex Networks Analysis to Assess Iran's Trade and It's Most Important Trading Partners in Asia”. Journal of Economic Modeling Research, 9(34);107-137 (In Persian).

Reyes, J., Schiavo, S. & Fagiolo, G. (2010). “Using Complex Network Analysis to Assess the Evolution of International Economic Integration: The Cases of East Asia and Latin America”. The Journal of International Trade & Economic Development, 19 , 215-239.

Rivera-Batiz, L. & Romer, P. (1991). “Economic Integration and Endogenous Growth”. The Quarterly Journal of Economics, 106(2), 531-555.

Romer, P. (1990). “Endogenous Technological Change”. Journal of Political Economy, 98(5), S71-S102.

Sajedianfard, N. & Hadian, E. (2021). “Appropriate Trading Partners for Iran in Importing Machinery and Transport Equipment: A Network Theory Approach”. Journal of Economics and Modelling, 11(4), 27-56 (In Persian).

Samadi, A, H. & Zahedi, S. (2019). “Analyzing Stability of Global Natural Gas Trade Network: An Application of Complex Network Theory”. Quarterly Journal of Energy Policy and Planning Research, 4(4), 7-40. (In Persian)

Schweitzer, F., Fagiolo, G., Sornette, D., Vega-Redondo, F., Vespignani, A. & Douglas, R. W. (2009). “ Economic networks: the new Challenges”. Science 325, 422–425.

Serrano, M. A. & Boguná, M. (2003). “Topology of the World Trade Web”. Physical Review E, 68(1), 015101.

Shirazi, H., Azarbaiejani, K. & Sameti, M. (2015). “Study of Iran’s Position in the World Trade: A Network Approach”. Journal of Economic Research, 50(4), 881-902 (In Persian).

Snowdon, B. & Vane, H. R. (2005). Modern Macroeconomics: its Origins, Development and Current State. Edward Elgar Publishing.

Squartini, T., Fagiolo, G. & Garlaschelli, D. (2011). “Randomizing World Trade. II. A Weighted Network Analysis”. Physical Review E, 84(4), 046118.

Stojkoski, V. & Kocarev, L. (2017). “The Relationship Between Growth and Economic Complexity: Evidence from Southeastern and Central Europe”. MPRA Paper, No. 77837, doi:10.13140/RG.2.2.22873.93282

Ugurlu, E. (2009). “Growth and Openness Relationship in the EU-15: Panel Data Analysis”. Ekonomika, 89(2), 44-54.

Watts, D. J. (2004). “The ‘New’ Science of Networks”. Annual Review of Sociology, 30(1), 243–270.

Zhang, P., Wang, T. & Yan, J. (2021). “Pagerank Centrality and Algorithms for Weighted, Directed Networks with Applications to World Input-Output Tables”. Physica A: Statistical Mechanics and its Applications, 586, 1-19.

Zhou, M., Wu, G. & Xu, H. (2016). “Structure and Formation of Top Networks in International Trade, 2001–2010”. Social Network, 44, 9-21.

Effect of World Trade Centrality Indicators on Economic Growth: the Approach of Weighted Complex Networks (Case Study: Chosen Countries of Asia and CIS)

References

References

Volume 14, Issue 54May 2024Pages 113-93

Volume 14, Issue 54
May 2024
Pages 113-93