The Issues of Zero Values in Trade Data and Modelling

Fatima Olanike Kareem (Global State of Young Scientists Global Young Academy Halle (Salle))
Olayinka Idowu Kareem (Trade and Development Policy Research Network)

Abstract


International trade provides a channel with which the interaction, integration and partnership of countries can be attained and/or established. Despite the relevance of trade to national, regional and global economies, the documentation of these economic activities is sometimes inadequate such that it brings to question the validity of the generated data. Empirical scholars often find it difficult to analyze trade statistics with zero-trade values, especially in terms of finding natural logarithm. Researchers often deal with the zero trade statistics by employing the truncation method or censoring method. However, this has consequences for empirical analysis and policy formulation because there is information in the zero-value trade that will be lost if they are truncated from the dataset. Hence, the main challenge in the literature is the issue of the most appropriate and efficient empirical strategy for solving the problem of zero-trade values among available options. This has led to controversy in the literature with several proofs and reproofs, actions and reaction as well as counter-reaction. It is on this basis that this paper is situated to review the raging controversy on the solution to the consideration of zero values in trade statistics as applicable to positive trade analysis and/or modelling.  


Keywords


Trade statistics; Gravity modeling;Theoretical framework;Zero trade

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DOI: https://doi.org/10.30564/mmpp.v1i1.749

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