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Economic Analysis Of Asean Free Trade Area; By A Country Panel Data

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Author Info
Nguyen Trung Kien () (Osaka School of International Public Policy, Osaka University)
Yoshizo Hashimoto (Osaka School of International Public Policy, Osaka University)
Abstract

This paper is an attempt to use the Hausman-Taylor (HT) estimation to examine the determinants of trade flows of Asean Free Trade Area (AFTA). Based on the two-way error component form of the gravity model, we employ the HT technique to estimate export flows by a country panel data of 39 countries for the period 1988-2002. The estimations have shown the following important results. Firstly, export flows among two countries increase more proportionately with GDPs. More interestingly, trade is higher between countries of identical preferences than those of different ones. Secondly, the most crucial result is that AFTA has only produced the trade creation among its members. Finally, this study suggests the importance of trade facilitation policy to support the targets of FTA.

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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 05-12.

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Length: 23 pages
Date of creation: May 2005
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Handle: RePEc:osk:wpaper:0512

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Keywords: AFTA; gravity models; panel data; trade.;

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Find related papers by JEL classification:
F1 - International Economics - - Trade
F15 - International Economics - - Trade - - - Economic Integration
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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  1. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June. [Downloadable!] (restricted)
  2. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February. [Downloadable!] (restricted)
  3. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August. [Downloadable!] (restricted)
  4. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January. [Downloadable!] (restricted)
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  5. Robert J. R. Elliott & Kengo Ikemoto, 2004. "AFTA and the Asian Crisis: Help or Hindrance to ASEAN Intra-Regional Trade?," Asian Economic Journal, East Asian Economic Association, vol. 18(1), pages 1-23, 03. [Downloadable!] (restricted)
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  6. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Blackwell Publishing, vol. 20(3), pages 363-368, 05. [Downloadable!] (restricted)
  7. Oguledo, Victor Iwuagwu & MacPhee, Craig R, 1994. "Gravity Models: A Reformulation and an Application to Discriminatory Trade Arrangements," Applied Economics, Taylor and Francis Journals, vol. 26(2), pages 107-20, February.
  8. Paul Krugman, 1989. "Is Bilateralism Bad?," NBER Working Papers 2972, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D., 2003. "Augmented gravity model: An empirical application to Mercosur- European trade flows," International Trade 0309019, EconWPA. [Downloadable!]
  10. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November. [Downloadable!] (restricted)
  11. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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  1. Cardamone, Paola, 2007. "A survey of the assessments of the effectiveness of Preferential Trade Agreements using gravity models," Working Papers 7282, TRADEAG - Agricultural Trade Agreements. [Downloadable!]
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