Exploring multi-country dynamic relations between trade and conflict

Most previous studies use a dyad as the unit of analysis and ignore the simultaneity of trade and conflict. The goal of this paper is to find out whether multi-country trade and conflict relations are statistically significant and the nature of those relations. We employ a multi-country, simultaneous framework, using the United States-Soviet Union-(West) Germany triangle as an example. The empirical analysis, from the first quarter of 1963 to the last quarter of 1991, demonstrates that trade and conflict are significantly interrelated, with positive reciprocity and inertia. Moreover, we find that dyadic flows strongly affect other dyads. The nature of these inter-dyadic effects depends on particular dyads, but both inter- and intra-dyad effects are statistically significant.