Exponential random grahp model as tool for analyzing of international trade

Abstract

This paper deals with the analysis of international trade within the EU from the point of view of modelling social networks using the exponential random graph method. This method appears to be convenient from a practical point of view because it examines the behaviour of specific entities within the network. There are many studies that analyse the various effects of bilateral trade relationships from different perspectives, such as the volatility rate. International trade has a huge impact on the development of globalization within the world. It creates the appropriate background for the further development of relations between countries and not necessarily between countries dealing with trade. Exponential random graph models attempt to look for dependencies in relationships between entities, and then create a model for network structure. This model provides a view of the entire network from the point of view of local structures such as reciprocated ties or triangles. The social network can then be perceived as a structure that is made up of local patterns of specific relationships that we call network configurations. These configurations correspond to the model parameters. Exponential random graph can be used to create models in different cases and one of the areas where these models are not so much used is international trade. The international trade of EU is well recorded and it is possible to establish a network of relationships where the level of trade and the interconnection between countries creates the appropriate background for further modelling using exponential random graph models.