By Thomas Baranga
This paper proposes a new method to reconcile countries’ reports of their bilateral trade, extracting the optimal amount of information from noisy reports. Reconciled estimates are a weighted average of exporter and importer reports, with weights chosen to minimise the variance of the error in the reconciliation estimate. Reports of countries that appear to report their trade more precisely are given more weight, but non-zero weight is (optimally) given even to relatively noisy reporters.
Friday, January 12, 2018