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North American Free Trade Agreement Bilateral Trade Effects

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  • MICHELLE CASARIO

Abstract

This study evaluates the effects of the North American Free Trade Agreement (NAFTA) on bilateral trade between the United States and Canada and between the United States and Mexico. Trade flow estimates are from a vector autoregression (VAR) model. The VAR methodology allows modeling bilateral trade in a flexible manner that incorporates both the interaction between different variables and the dynamics of trade, output, prices, and the exchange rate. After testing the outside sample forecasting ability of the models, the study produces dynamic forecasts of bilateral trade. It then compares forecasts incorporating the effects of the NAFTA with baseline forecasts. The results suggest expanded trade for all three countries and an improvement in the U.S. trade position with both Canada and Mexico.

Suggested Citation

  • Michelle Casario, 1996. "North American Free Trade Agreement Bilateral Trade Effects," Contemporary Economic Policy, Western Economic Association International, vol. 14(1), pages 36-47, January.
    • Handle: RePEc:bla:coecpo:v:14:y:1996:i:1:p:36-47
    DOI: 10.1111/j.1465-7287.1996.tb00601.x
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    References listed on IDEAS

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    Cited by:

    1. Paul Kalenga, 2000. "Regional Trade Integration in Southern Africa: Critical Policy Issues," Working Papers 00042, University of Cape Town, Development Policy Research Unit.
    2. Konno, Toru & Fukushige, Mototsugu, 2003. "Did NAFTA cause the structural changes in bilateral import functions between the US and Mexico?," Journal of Policy Modeling, Elsevier, vol. 25(1), pages 53-59, January.
    3. Yeboah, Osei Agyeman & Shaik, Saleem & Agyekum, Afia Fosua, 2015. "Potential Impact of TPP Trade Agreement on US Bilateral Agricultural Trade: Trade Creation or Trade Diversion?," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196849, Southern Agricultural Economics Association.
    4. Asci, Serhat C. & Paggi, Mechel & Yamazaki, Fumiko, 2016. "Implications of Trans-Pacific Partnership for the US Dairy Industry," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(B), pages 1-16, August.
    5. Foroutan, Faezeh, 1998. "Does membership in a regional preferential trade arrangement make a country more or less protectionist?," Policy Research Working Paper Series 1898, The World Bank.

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