Title : Does Political Risk lower Bilateral Trade Flow? A Gravity Panel Framework for Thailand vis-a-vis her Trading Partners

Authors : Gour Goswami, Nisit Panthamit

Abstract : Political factors play a pivotal role in determining bilateral trade flow of Thailand with her major trading partners. This paper attempts to examine the role of disaggregate political risk for Thailand in determining the bilateral trade flow across her 132 trading partner countries. Using the DOTS Data, CEPII data, the Dynamic Gravity data set and twelve ICRG political risk indicators for the period 1984-2015 in a panel set-up this paper examines the relative role of political risk factors in deterring her trade flow in a panel framework. Following conventional wisdom we find that bilateral real GDP, common religion, membership in trading arrangements etc. are trade-promoting. Using Panel OLS, Panel GLS with three different error specifications we find that political risk especially Government Instability at home and abroad, Investment Profile at home and abroad, External Conflict at home and abroad and Military in Politics at home and abroad significantly lowers bilateral trade flow after controlling for traditional gravity determinants like bilateral real GDP, bilateral per capita real GDP, distance, common religion, membership of ADB, ASEAN, ASEAN+3, FTA in general under WTO, GATT, land locked status, island status and OECD vs. non OECD classification, etc.

Journal : SSRN Working Paper Volume : Year : 2020 Issue :
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