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Free Trade Areas And Intra-Regional Trade: The Case Of Asean

Author

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  • MAURICE J. G. BUN

    (Tinbergen Institute & Amsterdam School of Economics, Universiteit van Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands)

  • FRANC J. G. M. KLAASSEN

    (Tinbergen Institute & Amsterdam School of Economics, Universiteit van Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands)

  • G. K. RANDOLPH TAN

    (Division of Economics, School of Humanities & Social Sciences, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore)

Abstract

We study the effects of free trade areas on bilateral trade flows. We review and extend the previous empirical literature by embarking on the modelling of unobserved heterogeneity. We apply our preferred model to the case of the Asean Free Trade Area (AFTA). The estimation results suggest that there has been a positive effect of AFTA. This empirical finding is contrary to earlier estimation results, which are typically not so positive about AFTA. It is our impression that these earlier estimates on AFTA are confounded with the effects of unobserved determinants of trade.

Suggested Citation

  • Maurice J. G. Bun & Franc J. G. M. Klaassen & G. K. Randolph Tan, 2009. "Free Trade Areas And Intra-Regional Trade: The Case Of Asean," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 54(03), pages 319-334.
    • Handle: RePEc:wsi:serxxx:v:54:y:2009:i:03:n:s0217590809003367
    DOI: 10.1142/S0217590809003367
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    References listed on IDEAS

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    1. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
    2. Oh, Chang Hoon & Selmier II, W. Travis, 2008. "Expanding international trade beyond the RTA border: The case of ASEAN's economic diplomacy," Economics Letters, Elsevier, vol. 100(3), pages 385-387, September.
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    Cited by:

    1. Patrick Blagrave & Claudia Godbout & Justin-Damien Guénette & René Lalonde & Nikita Perevalov, 2020. "IMPACT: The Bank of Canada’s International Model for Projecting Activity," Technical Reports 116, Bank of Canada.
    2. Okabe, Misa & Urata, Shujiro, 2014. "The impact of AFTA on intra-AFTA trade," Journal of Asian Economics, Elsevier, vol. 35(C), pages 12-31.
    3. Misa OKABE, 2015. "Impact of Free Trade Agreements on Trade in East Asia," Working Papers DP-2015-01, Economic Research Institute for ASEAN and East Asia (ERIA).
    4. Muhammad Aftab & Karim Bux Shah Syed & Naveed Akhter Katper, 2017. "Exchange-rate volatility and Malaysian-Thai bilateral industry trade flows," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(1), pages 99-114, January.
    5. Ramstetter, Eric D. & Archanun, Kohpaiboon, 2015. "The Effects of the ASEAN Economic Community 2015 on Industries in Kitakyushu and Shimonoseki," AGI Working Paper Series 2015-04, Asian Growth Research Institute.

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    More about this item

    Keywords

    AFTA; ASEAN; free trade area; gravity model; panel data; C23; F15;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F15 - International Economics - - Trade - - - Economic Integration

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