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Economic Interdependence and Peaceful Power Transition
Unformatted Document Text:  18 the ratio of bilateral trade to a state’s gross domestic product (Oneal & Russett, 1997, 1999a,b). All these scholars measure economic interdependence by trade and neglect the capital market. In this thesis, I interact World Bank FDI data and International Monetary Fund’s Direction of Trade Statistics data with trade activity data (Barbieri 1995; Oneal and Russett 1997) in a joint representation of both financial market and trade to develop a better measure. This measure captures the importance of the bilateral trade relationship and capital flow in a dyad. For each of the two states in a dyad, the level of the value of trade (import and export) and the openness of the financial market are two constitutive elements. This helps to identify to what degree the rising state relies on the status quo provided by the leading state. Economic interdependence to the system: Equation III: ) ( ) ( ) ( ) ( ) , ( exp all all a all a a all a system GDP FDI ort import EI ⇔ + + = a a Economic interdependence to another state: Equation IV: ) ( ) ( ) ( ) ( ) , ( exp a b a b a a b a dyad GDP FDI ort import EI ⇔ → → + + = Equation III calculates the economic interdependence of country A to the system. Equation IV estimates the economic interdependence at the dyadic level.

Authors: Zhou, Xinwu.
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18
the ratio of bilateral trade to a state’s gross domestic product (Oneal & Russett, 1997,
1999a,b). All these scholars measure economic interdependence by trade and neglect the
capital market. In this thesis, I interact World Bank FDI data and International Monetary
Fund’s Direction of Trade Statistics data with trade activity data (Barbieri 1995; Oneal
and Russett 1997) in a joint representation of both financial market and trade to develop a
better measure. This measure captures the importance of the bilateral trade relationship
and capital flow in a dyad. For each of the two states in a dyad, the level of the value of
trade (import and export) and the openness of the financial market are two constitutive
elements. This helps to identify to what degree the rising state relies on the status quo
provided by the leading state.
Economic interdependence to the system:
Equation III:
)
(
)
(
)
(
)
(
)
,
(
exp
all
all
a
all
a
a
all
a
system
GDP
FDI
ort
import
EI
+
+
=
a
a
Economic interdependence to another state:
Equation IV:
)
(
)
(
)
(
)
(
)
,
(
exp
a
b
a
b
a
a
b
a
dyad
GDP
FDI
ort
import
EI
+
+
=
Equation III calculates the economic interdependence of country A to the system.
Equation IV estimates the economic interdependence at the dyadic level.


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