This paper provides an approach to model time dependent network structure with applications to international trade. We study how a trade shock between two countries can potentially affect trade with a third country by developing a theoretical model where trade between countries forms a time dependent dynamic relational network. The model allows for complementarities in trade, that is, a positive shock between two countries affects trade with third parties. We first determine the countries in the same network, then we derive a new type of gravity equation, where the network structure plays a determinant role. We apply the methodology to a longitudinal bilateral trade flow data from US and 23 countries.
