The double role of GDP in shaping the structure of the International Trade Network Online publication date: Mon, 02-Oct-2017
by Assaf Almog; Tiziano Squartini; Diego Garlaschelli
International Journal of Computational Economics and Econometrics (IJCEE), Vol. 7, No. 4, 2017
Abstract: The International Trade Network (ITN) is the network formed by trade relationships between world countries. The complex structure of the ITN impacts important economic processes such as globalisation, competitiveness, and the propagation of instabilities. Modelling the structure of the ITN in terms of simple macroeconomic quantities is therefore of paramount importance. While traditional macroeconomics has mainly used the gravity model to characterise the magnitude of trade volumes, modern network theory has predominantly focused on modelling the topology of the ITN. Combining these two complementary approaches is still an open problem. Here we review these approaches and emphasise the double role played by gross domestic product (GDP) in empirically determining both the existence and the volume of trade linkages. Moreover, we discuss a unified model that exploits these patterns and uses only the GDP as the relevant macroeconomic factor for reproducing both the topology and the link weights of the ITN.
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