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Trade Liberalization or Oil Shocks: Which Explains Structural Breaks in International Trade Ratios?

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Author Info

  • Suleiman Abu-Bader

    ()
    (Department of Economics, Ben-Gurion University of the Negev)

  • Aamer Abu-Qarn

    ()
    (Department of Economics, Ben-Gurion University of the Negev)

Abstract

Ben-David and Papell's (1997) tests for structural breaks in international trade ratios over the post-WWII period revealed that trade ratios exhibited structural breaks in their paths and that postbreak trade averages exceeded prebreak averages. They attributed these breaks to trade liberalization policies executed during the postwar period. We reevaluate their results by comparing the postbreak trade ratios with extrapolated ratios based on the prebreak trend, and testing for structural breaks in the relative prices of imports (exports). We find that oil shocks rather than trade liberalization were the major factor behind the structural breaks in trade ratios.

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File URL: http://www.econ.bgu.ac.il/papers/227.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 227.

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Length: 34 pages
Date of creation: Dec 2006
Date of revision:
Publication status: Published in Review of International Economics as: Abu-Bader, S. and Abu-Qarn, A. S. (2010) “Trade Liberalization or Oil Shocks: Which Better Explains Structural Breaks in International Trade Ratios?,” Review of International Economics, 18(2), pages 250–264.
Handle: RePEc:bgu:wpaper:227

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Keywords: International trade; Trade Liberalization; Structural change; Oil shocks; Kennedy Round;

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  1. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  2. Perron, Pierre & Vogelsang, Timothy J, 1992. "Nonstationarity and Level Shifts with an Application to Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 301-20, July.
  3. Andrew K. Rose, 1990. "Why has trade grown faster than income?," International Finance Discussion Papers 390, Board of Governors of the Federal Reserve System (U.S.).
  4. Marvel, Howard P & Ray, Edward J, 1983. "The Kennedy Round: Evidence on the Regulation of International Trade in the United States," American Economic Review, American Economic Association, vol. 73(1), pages 190-97, March.
  5. Ben-David, Dan & Papell, David H., 1997. "International trade and structural change," Journal of International Economics, Elsevier, vol. 43(3-4), pages 513-523, November.
  6. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  7. Vogelsang, Timothy J., 1997. "Wald-Type Tests for Detecting Breaks in the Trend Function of a Dynamic Time Series," Econometric Theory, Cambridge University Press, vol. 13(06), pages 818-848, December.
  8. Irwin, Douglas A, 1996. "The United States in a New Global Economy? A Century's Perspective," American Economic Review, American Economic Association, vol. 86(2), pages 41-46, May.
  9. repec:cup:etheor:v:13:y:1997:i:6:p:818-49 is not listed on IDEAS
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