Empirical evaluations of trade agreements often rely on descriptive statistics or univariate time series methods to detect subsequent changes in trade flows. We conduct a more satisfactory test by evaluating an agreement in the context of a structural econometric model. Consistent with trade theory, import demand is modeled as a cointegrating relationship with income and relative price variables, where trade agreements may cause structural changes in cointegrating vectors. This approach is applied to study the effect of several U.S.-Japan market-opening trade agreements; in three of seven industries we find evidence of structural change that may be related to trade agreements.
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number
200217.
Find related papers by JEL classification: F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F14 - International Economics - - Trade - - - Country and Industry Studies of Trade C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
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