Authors: Assaf Almog; Tiziano Squartini; Diego Garlaschelli
Addresses: Instituut-Lorentz for Theoretical Physics, Leiden Institute of Physics, University of Leiden, Niels Bohrweg 2, 2333 CA Leiden, The Netherlands ' IMT School for Advanced Studies Lucca, P.zza S. Ponziano 6, 55100 Lucca, Italy ' Instituut-Lorentz for Theoretical Physics, Leiden Institute of Physics, University of Leiden, Niels Bohrweg 2, 2333 CA Leiden, The Netherlands
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.
Keywords: network theory; econophysics; exponential random graph model; fitness model; GDP; gross domestic product.
International Journal of Computational Economics and Econometrics, 2017 Vol.7 No.4, pp.381 - 398
Received: 05 Dec 2015
Accepted: 27 Jun 2016
Published online: 18 May 2017 *