<p>International trade data are frequently used to analyze the impact of trade policy on respective countries’ trade value over time. However, the value of trade depends upon multiple factors like Gross Domestic Product (GDP), distance between the countries, exchange rates, trade policy, and Free Trade Agreements (FTAs), etc. While measuring the effects of trade agreements, traditional econometric methods struggle with endogeneity issues, particularly the bidirectional causality between trade and trade agreements. Early literature assumed FTA to be exogenous. However, later studies recognized that the FTA is endogenous, being influenced by both the outcome and control variables, which can bias the estimation of agreement effects. The synthetic control method (SCM) effectively addresses endogeneity. To explore the appropriateness of SCM for trade agreement evaluation, a bibliometric analysis is carried out on 5088 downloaded documents from Scopus databases. The results show that SCM has not yet become a major focus in the current research field, but it has high potential to strengthen future research. It establishes the impact caused by the trade agreement by constructing an artificial donor pool that effectively replicates the trade patterns between the countries before the trade agreement and compares it with the actual trade patterns after the trade agreement implementation.</p>

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Synthetic control method and trade policy evaluation: a bibliometric analysis and upcoming research pathways

  • Amrita Jain,
  • Qamar Alam

摘要

International trade data are frequently used to analyze the impact of trade policy on respective countries’ trade value over time. However, the value of trade depends upon multiple factors like Gross Domestic Product (GDP), distance between the countries, exchange rates, trade policy, and Free Trade Agreements (FTAs), etc. While measuring the effects of trade agreements, traditional econometric methods struggle with endogeneity issues, particularly the bidirectional causality between trade and trade agreements. Early literature assumed FTA to be exogenous. However, later studies recognized that the FTA is endogenous, being influenced by both the outcome and control variables, which can bias the estimation of agreement effects. The synthetic control method (SCM) effectively addresses endogeneity. To explore the appropriateness of SCM for trade agreement evaluation, a bibliometric analysis is carried out on 5088 downloaded documents from Scopus databases. The results show that SCM has not yet become a major focus in the current research field, but it has high potential to strengthen future research. It establishes the impact caused by the trade agreement by constructing an artificial donor pool that effectively replicates the trade patterns between the countries before the trade agreement and compares it with the actual trade patterns after the trade agreement implementation.