Empirical tests on International Trade

We are interested in estimating the following system of equations:

where NX/GDP is the net export over GDP of country i at time t. ΔCAIi,t denotes the percentage change of the climate attention index for country i and quarter t, ΔCAIt is the cross sectional average of CAI at date t, i.e., the global CAI index. The term control is a vector of control variables including the change in the industrial production index to control for country-specific productivity shock, and the share of Twitter volume on days when the CAI is at the bottom 5%, to control for other events that affect Twitter activities.

Given our interest on the role of global climate news shocks on the dynamics of international trade, we focus on the estimated parameter Γ in equation (4). According to our model, this coefficient should be negative.