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Evaluating the Trade Effect of Developing Regional Trade Agreements: a Semi-parametric Approach

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  • Coulibaly, Souleymane

    ()
    (The World Bank)

Abstract

Many recent papers have pointed to ambiguous trade effects of developing regional trade agreements, calling for a reassessment of their economic merits. This paper focuses on 22 RTAs involving mostly developing countries and covering all the continents and use trade flows over the period 1962-2006. It proposes a two-step estimation approach to assess their trade impact: first estimate a gravity equation excluding the RTA variables, and then use the trade residuals estimated to run a kernel regression for each of the RTAs. This approach allows capturing the non-monotonic trade effects of the RTAs over time while imposing minimal structure on the model, and is flexible enough to be extended to any new RTA. As existing RTAs are deepened and new ones are being negotiated, ensuring that trade creation dominates trade diversion will be essential, particularly in the post-crisis world where resources will be limited for all countries.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 24 (2009)
Issue (Month): ()
Pages: 709-743

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Handle: RePEc:ris:integr:0491

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: regional trade agreement; kernel regression; two-step estimation; trade impact; gravity model;

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References

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  1. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
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  4. R J R Elliott & K Ikemoto, 2003. "AFTA and the Asian Crisis: Help or Hindrance to ASEAN Intra-Regional Trade?," The School of Economics Discussion Paper Series 0311, Economics, The University of Manchester.
  5. Caroline L. Freund & John McLaren, 1999. "On the dynamics of trade diversion: evidence from four trade blocs," International Finance Discussion Papers 637, Board of Governors of the Federal Reserve System (U.S.).
  6. I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
  7. Philippa Dee & Jyothi Gali, 2003. "The Trade and Investment Effects of Preferential Trading Arrangements," NBER Working Papers 10160, National Bureau of Economic Research, Inc.
  8. Carrere, Celine, 2006. "Revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model," European Economic Review, Elsevier, vol. 50(2), pages 223-247, February.
  9. Lucian Cernat, 2001. "ASSESSING REGIONAL TRADE ARRANGEMENTS: ARE SOUTH–SOUTH RTAs MORE TRADE DIVERTING?," International Trade 0109001, EconWPA.
  10. Anne O. Krueger, 1999. "Trade Creation and Trade Diversion Under NAFTA," NBER Working Papers 7429, National Bureau of Economic Research, Inc.
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Cited by:
  1. Afesorgbor, Sylvanus Kwaku & van Bergeijk, Peter A.G., 2011. "Multi-membership and effectiveness of regional trade agreements in Western and Southern Africa: a comparative study of ECOWAS and SADC," Proceedings of the German Development Economics Conference, Berlin 2011 1, Verein für Socialpolitik, Research Committee Development Economics.
  2. Jean-Marc Siroën & Aycil Yucer, 2011. "The Impact of MERCOSUR on Trade of Brazilian States," Working Papers DT/2011/07, DIAL (Développement, Institutions et Mondialisation).
  3. Festus Ebo Turkson, . "Trade Agreements and Bilateral Trade in Sub-Saharan Africa: Estimating the Trade Effects of the EU-ACP PTA and RTAs," Discussion Papers 12/07, University of Nottingham, CREDIT.
  4. World Bank, 2012. "Reshaping Economic Geography of East Africa : From Regional to Global Integration, Volume 2. Technical Annexes," World Bank Other Operational Studies 11916, The World Bank.
  5. FE, Doukouré Charles, 2010. "Réduction de Droits de Douane et Convergence Réelle dans l'UEMOA
    [Tariffs Reduction and Real Convergence in WAEMU]
    ," MPRA Paper 26763, University Library of Munich, Germany.
  6. Festus Ebo Turkson, . "Using Observable Trade Data to Measure Bilateral Trade Costs in Sub-Saharan Africa," Discussion Papers 12/06, University of Nottingham, CREDIT.

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