Gravity model with fixed effects - controlling for the heterogeneity

#1
Hi Stata users,

I'm quite new to Stata and econometric packages in general, so I'd like to get some hints on how to specify a gravity model for international trade between different countries. My panel consists of 133 countries over 19 years - thus we have 17556 combinations of importers (ci) and exporters (cj), for each year. I pretend to follow the regressions using fixed effects, such as the equation number 3 (page six) of Cheng e Wall (2005) [link: http://research.stlouisfed.org/publications/review/05/01/Cheng.pdf], i.e. controlling the heterogeneity for "country-pair" effects and the effects for each year t of my panel.

I use the Stata/SE 12.0, on a Intel Core i5, 1.70GHz computer (not sure if this information is useful anyway).

Anyone could help me to create these dummies for "country-pair" and "time" effects please? I would run regression using the xtreg command, and my dataset is already adjusted on Stata for panel structure, along with other usual variables of gravity equation, e.g. GDP, population, weighted distance (the remoteness), country size etc. A colleague of mine told there was no need to create and specify the dummies for the "country-pair" effects, since the xtreg command would implicitly consider it on the regression... I'm not sure of this, and that's why I request your attention with my doubts.

Thank you all in advance!
Jean Amann.