  This study decomposes the bilateral trade flows using a three-dimensional
panel data model. Under the scenario that all three dimensions diverge to
infinity, we propose an estimation approach to identify the number of global
shocks and country-specific shocks sequentially, and establish the asymptotic
theories accordingly. From the practical point of view, being able to separate
the pervasive and nonpervasive shocks in a multi-dimensional panel data is
crucial for a range of applications, such as, international financial linkages,
migration flows, etc. In the numerical studies, we first conduct intensive
simulations to examine the theoretical findings, and then use the proposed
approach to investigate the international trade flows from two major trading
groups (APEC and EU) over 1982-2019, and quantify the network of bilateral
trade.
