Analysis of the Stability of the Model for Forecasting Mutual Volumes Russia’s Trade with BRICS Partners

The paper is devoted to the construction of models for forecasting the volume of trade between Russia and the BRICS countries under sanctions. Trade between the BRICS countries is the economic foundation of their comprehensive interaction and prosperity, therefore the problem of high-quality forecasting of the volume of this trade under unprecedented Western sanctions against Russia seems to be a relevant task of econometric modeling. The aim of the study is to improve the accuracy of forecasts of Russia’s trade turnover with BRICS partners by ensuring the stability of the forecasting model in the context of sanctions pressure from Western countries and the pandemic. The econometric tool chosen is a system of simultaneous equations describing the foreign trade turnover of each country (other than Russia) using annual levels of macroeconomic factors: the GDP of the BRICS countries, Brent oil prices, the US dollar exchange rate and the pandemic indicator over the time period 2000–2022. In order to take into account structural changes in fast-growing economies such as India and China, two-phase models (switching models) were used to describe their behavioral equations in a system of simultaneous equations. As a test for the significance of structural changes, due to the small sample size after structural changes, the Chow forecast test was used. Taking into account significant structural changes (in the post-pandemic period) within the framework of switching models allowed us to increase the accuracy of the forecast of the volume of trade turnover of the Russian Federation by 2.5 times.

1. Byvshev V. A., Voronkova E. I., Golubeva K. O., Gur’eva V.D., Fedorov A. O. Econometric modeling of the volume of Russia’s mutual trade with the BRICS partners. Sovremennaya matematika i kontseptsii innovatsionnogo matematicheskogo obrazovaniya. 2022;9(1):120–130. (In Russ.). DOI: 10.54965/24129895_2022_9_1_120

2. Sharova E. A. Mutual trade between BRICS countries today. Problemy natsional’noi strategii = National Strategy Issues. 2016;(2):150–174. (In Russ.).

3. Mehta N., Gupta S., Maitra Sh. Impact of foreign direct investment on manufacturing sector: Evidence from Indian economy. Finance: Theory and Practice. 2023;27(1):116–126. DOI:10.26794/2587–5671–2023–27–1–116–126

4. Tinbergen J. An analysis of world trade flows. In: Shaping the world economy: Suggestions for an international economic policy. Appendix VI. New York, NY: The Twentieth Century Fund; 1962:262–293. URL: https://repub.eur.nl/pub/16826/Appendices.pdf

5. Anderson J. A theoretical foundation for the gravity equation. The American Economic Review. 1979;69(1):106–116. URL: https://people.brandeis.edu/~cerbil/TheoryOfGravity.pdf

6. Troekurova I. S., Pelevina K. A. Gravity models of foreign trade of BRICS countries. Izvestiya Saratovskogo universiteta. Novaya Seriya. Seriya: Ekonomika. Upravlenie. Pravo = Izvestiya of Saratov University. New Series. Series: Economics. Management. Law. 2014;14(1–2):133–142. (In Russ.).

7. Makhov S. A. BRICS trade dynamic model. Preprinty IPM im. M. V. Keldysha = Keldysh Institute Preprints. 2016;(128):1–16. (In Russ.). DOI: 10.20948/prepr-2016–128

8. Bhat M. A., Jamal A., Beg M. N. Trade integration and export aspiration: Evidence from India’s trade in goods with BRICS countries. Organizations and Markets in Emerging Economies. 2022;13(2):490–514. DOI: 10.15388/omee.2022.13.90

9. Pesaran M. H., Schuermann T., Smith L. V. Forecasting economic and financial variables with global VARs. International Journal of Forecasting. 2009;25(4):642–675. DOI: 10.1016/j.ijforecast.2009.08.007

10. Chaudhry A., Hyder K. A structural VAR analysis of Pakistan’s textile export. Middle East Journal of Scientific Research. 2012;12(4):464–478. DOI: 10.5829/idosi.mejsr.2012.12.4.1635

11. Rani R., Kumar N. On the causal dynamics between economic growth, trade openness and gross capital formation: Evidence from BRICS countries. Global Business Review. 2019;20(3):795–812. DOI: 10.1177/0972150919837079

12. Banday U. J., Murugan S., Maryam J. Foreign direct investment, trade openness and economic growth in BRICS countries: Evidences from panel data. Transnational Corporations Review. 2021;13(2):211–221. DOI: 10.1080/19186444.2020.1851162

13. Abakumova Yu.G., Pavlovskaya S. V. Matrix modeling of bilateral trade relations of countries. In: Vectors of foreign economic activity. Minsk: Institute of Economics of the National Academy of Sciences of Belarus; 2010:371–382. (In Russ.).

14. Radionova M. V., Kulakova A. M. Modeling of mutual commodity trade between countries (a case study of the Eurasian Economic Union member states per industry). Finansovaya analitika: problemy i resheniya = Financial Analytics: Science and Experience. 2015;(34):41–54. (In Russ.).

15. Rahman M. M., Islam M. E. Does trade openness affect taxation? Evidence from BRICS countries. Millennial Asia. 2023. DOI: 10.1177/09763996231199310

16. Constantin M., Sacală M.-D., Dinu M., Piștalu M. Vegetable trade flows and chain competitiveness linkage analysis based on spatial panel econometric modelling and Porter’s Diamond Model. Agronomy. 2022;12(2):411. DOI: 10.3390/agronomy12020411

17. Kleiber C., Zeileis A. Applied econometrics with R. New York, NY: Springer-Verlag; 2008. 222 p.

18. Goldfeld S. M., Quandt R. E. Some tests for homoscedasticity. Journal of the American Statistical Association. 1965;60(310):539–547. DOI: 10.1080/01621459.1965.10480811

19. Breusch T. S. Testing for autocorrelation in dynamic linear models. Australian Economic Papers. 1978;17(31):334–355. DOI: 10.1111/j.1467–8454.1978.tb00635.x

20. Ramsey J. B. Test for specification errors in classical liner least-squares regression analysis. Journal of the Royal Statistical Society: Series B (Methodological). 1969;31(2):350–371. DOI: 10.1111/j.2517–6161.1969.tb00796.x

21. Jarque C. M., Bera A. K. A test for normality of observations and regression residuals. International Statistical Review. 1987;55(2):163–172. DOI: 10.2307/1403192

22. Zarembka P. Functional form in the demand for money. Journal of the American Statistical Association. 1968;63(322):502–511. DOI: 10.1080/01621459.1968.11009269

23. Balyhin M. G., Shajlieva M. M., Tsypin A. P. Statistical analysis of the economic development of the BRICS countries. Statistika i Ekonomika = Statistics and Economics. 2020;17(2):18–28. (In Russ.). DOI: 10.21686/2500–3925–2020–2–18–28

24. Kovaleva E. I., Rastopchina Yu.L., Bozhkov Yu.N., Brezhnev A. N. Assessment of Russia’s mutual trade with the BRICS countries. Industrial’naya ekonomika = Industrial Economics. 2023;(2):14–19. (In Russ.). DOI: 10.47576/2949–1886_2023_2_14

25. Kuan C.-M. Markov switching model. Kvantil’= Quantile. 2013;(11):13–39. URL: http://www.quantile.ru/11/11-CK.pdf (In Russ.).

26. Hamilton J. D. Analysis of time series subject to changes in regime. Journal of Econometrics. 1990;45(1–2):39–70. DOI: 10.1016/0304–4076(90)90093–9

27. Chow G. C. Tests of equality between sets of coefficients in two linear regressions. Econometrica. 1960;28(3):591–605. DOI: 10.2307/1910133

28. Slutskin L. Stability tests for linear regression models. Prikladnaya ekonometrika = Applied Econometrics. 2007;(2):126–135. (In Russ.).

29. Fisher F. M. Tests of equality between sets of coefficients in two linear regressions: An expository note. Econometrica. 1970;38(2):361–366. DOI: 10.2307/1913018