Decomposition of Bilateral Trade Flows Using a Three-Dimensional Panel Data Model

This study decomposes the bilateral trade flows using a three-dimensional panel data model. Under scenario that all three dimensions diverge to infinity, we pro- pose an estimation approach identify number of global shocks and country- specific sequentially, establish asymptotic theories accordingly. From practical point view, being able separate pervasive nonpervasive in multi-dimensional is crucial for range applications, such as, international financial linkages, migration flows, etc. In numerical studies, first conduct intensive simulations examine theoretical findings, then use proposed investigate from two major trading groups (APEC EU) over 1982-2019, quantify network trade.