Gravity Model PPML

[Abdalla Muktad]

Hello,
I am working on a gravity model. I study the impact of corruption on bilateral trade. I have a dataset of bilateral trade (export + Import), real gdpi, real gdpj, distance, populationi, populationj, contagious (dummy), regional trade agreement (dummy), Arab Spring (dummy), corruptioni, corruptionj. for time period of 2003-2018
I use PPML method and want to take exporter_time fixed effect, importer_time fixed effect and exporter_importer fixed effect into account. I use these commands
clear

use "/Users/user/Desktop/papers/MENA trade/data.dta"


* The analysis considers panel data with 4 year interval (2004, 2008, ..., 2016)

keep if year == 2004 | year == 2008 | year == 2012 | year == 2016

* Create the dependent variable

gen lt=log(tradef)

gen realdgpom = realgdpo/1000000
gen realdgppm = realdgpp/1000000
gen popom = popo/1000000
gen poppm = popp/1000000
gen gdpcapo = realgdpo/popo
gen gdpcapp = realdgpp/popp
gen ldist=log(dist)
gen lgdp_o=log(realdgpom)
gen lgdp_d=log(realdgppm)
gen lpop_o=log(popom)
gen lpop_d=log(poppm)
gen lgdpcapo=log(gdpcapo)
gen lgdpcapp=log(gdpcapp)


egen pairid = group(exporter importer)
tabulate pairid, gen(pairfe)

xtset pairid year

* Create exporter-time fixed effects
egen exp_time = group(exporter year)
tabulate exp_time, gen(EXPORTER_TIME_FE)

* Create importer-time fixed effects
egen imp_time = group(importer year)
tabulate imp_time, gen(IMPORTER_TIME_FE)


*PPML CONTROLLING FOR MRs WITH FIXED EFFECTS ****************

* Estimate the gravity model (1-28) with the PPML estimator and store the results

ppml tradef EXPORTER_TIME_FE* IMPORTER_TIME_FE* pairfe* lgdpcapo lgdpcapp lgdp_o lgdp_d ldist lpop_o lpop_d contig rta ar ccp, cluster(pairid)


Is every thing looks OK?