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This paper documents stylized facts about the evolution of trade and foreign direct investment (FDI) between India and the United States over the last four decades. We ask the question: does India-US trade and FDI deviate from its potential i. e. the level that would have been predicted by standard determinants? Using an augmented gravity model and a large sample of countries over 1970–2009, we find that while India’s exports to the US are 34 % higher than predicted, US exports to India are in line with its potential. Notably, we find strong reversals in the nature of these trading relationships over time. India loses its over-trading status while US turns out to be under-exporting to India in the period after 1990. We also find significant variation in trade performance across product categories. For primary and intermediate goods during post-1990, US exports to India turn significantly below normal. Conducting similar analysis for bilateral FDI flows for the period 1985–2009, we show that while US direct investments in India are in line with predictions based on fundamentals, India has actually been an under-investor in the US market.

Sports can help to increase foreign trade and promote global economic integration. Engaging in sports can provide visibility opportunities for countries and may spur the interest of firms as well as consumers in the respective foreign market. Sport could also help to infuse trust into cross-country business relationships. While previous studies have investigated the role of sport events on trade, this study analyzes whether countries can increase trade between them by engaging in sporting activities with each other. We use soccer, being the world’s most popular sport, as an example when investigating this potential bilateral sport-trade link. Our empirical strategy builds on the fact that many soccer matches between countries’ national teams are the result of a random drawing procedure. Thus, they are a possible source of exogenous variation. Using a gravity model framework, we test the proposed link for approximately 4,800 soccer matches that were played between 209 countries during the period 1995 through 2001. We also analyze the hypothesized underlying impact channel by estimating the impact on trade for goods that are likely to have different elasticity with respect to information and trust friction. The results are indicative of the hypothesis that countries that engage in sporting activities with each other enhance their bilateral trade. These results could have potentially interesting policy implications. Governments may want to consider actively promoting sporting activities together with countries with which they want to enhance their trade.

Since the post war period, the EU Common Commercial Policy (CCP) has moved in two directions mainly through Preferential Trade agreements (PTAs): a "deeper" (internal) trade integration process intended to reinforce trade relations among European countries (i.e. Custom Union, Single Market, European Monetary Union, Enlargement Process), and a "wider" (external) integration process intended to reinforce trade relations with third countries.

Surprisingly, there are very few empirical studies in the literature which specifically quantify the effects of the overall EU PTAs on the European countries’ trade flows. This paper seeks to fill this gap by conducting an empirical investigation on whether and how the CCP had a significant impact on European countries' imports. It adopts an extended version of the gravity model. In line with recent studies, it uses a Hausman Taylor estimator, controls for heterogeneity and includes a set of variables to proxy for the "multilateral trade resistance index"

According to our results, the EU "free trade area" has been a successful experiment in trade liberalisation. However, the positive and significant coefficient of PTAs signed by the EU with third countries may somehow have limited the occurrence of trade diversion effects. Indeed, the coefficient of the trade diversion dummy is significant but relatively small.

The well-known question whether regional trade agreements (RTAs) and the multilateral trading system (MTS) are “strangers, friends, or foes” (Bhagwati and Panagariya, 1996) has gained new importance with the widespread proliferation of RTAs in recent years. Based on an extensive data set which covers most of world trade over the past 60 years and about 240 regional trade agreements, we analyze the relationship between RTAs and the MTS by combining the gravity model framework with vector auto-regression analysis. Impulse-response-functions robustly suggest that multilateral trade liberalization responds in a significantly positive way to regional trade liberalization. We also find robust evidence that RTA liberalization Granger-causes GATT/WTO liberalization. Thus, our results indicate that RTAs do not undermine the MTS but serve as building blocks to multilateral trade liberalization.

In this study, we revisit a recent study that examined the role of GATT/WTO membership on trade flows. With this aim, we re-examine Rose (2004a)’s study and extend the data until 2007. Furthermore, we alternatively estimate the role of the organization, GATT/WTO, on trade by including more control variables that are believed to influence bilateral trade such as a defense pact (military alliance), military disputes, joint democracy and policy similarity. Empirical results clearly demonstrate that GATT/WTO membership does have a significant positive effect on trade.

World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World War II growth in manufacturing world trade along these two margins. We propose a “corner-solutions version” of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called “distance puzzle”. It also finds more convincing evidence than recent literature that WTO-membership enhances trade.

Recent evidence suggests that regional economic integration provides an important stimulus not only to trade, but also to FDI. In contrast, the available theory on FDI does not yet provide empirically testable propositions on the effects of concurrent trade and investment liberalisation. Moreover, given the limits of simulation models, which rely heavily upon parameter choice, in assessing the impact of such liberalisation, there is a need for empirical analysis to identify the principal features of FDI. This paper uses a ‘gravity model’ approach to assess the impact of the deepening integration between the EU and the CEECs on FDI flows in terms of three key issues. First, we provide systematic estimates or the expected long-term level of FDI in the CEECs. Second, we investigate whether FDI in the CEECs, on the one hand, and source country exports and imports. on the other hand, are complements or substitutes. Finally, we enquire whether an increase in the attractiveness of the CEECs to foreign investors has affected the magnitude of FDI going to other European countries.