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Algeria’s Trade with GAFTA Countries: A Synthetic Control Approach

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  • Amr Hosny

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Abstract

Arab countries signed the Greater Arab Free Trade Area (GAFTA) agreement in 1998, while Algeria only joined in 2005. In this study, I investigate the counterfactual trade that Algeria would have had with its GAFTA trade partners had it joined the agreement in 1998. I employ synthetic control methods (SCM) in the context of the gravity approach to international trade to estimate this counterfactual outcome. The SCM creates the synthetic control unit based on a weighted average of the past characteristics and trade realizations of the countries that signed the GAFTA agreement and compares the counterfactual trade outcome against the actual outcome of the treated unit, Algeria in our case. Estimation results indicate that Algeria’s trade with nine GAFTA countries, covering more than 96 % of Algeria’s pre-treatment trade, would have improved if Algeria had signed the agreement in 1998. Copyright Springer-Verlag 2012

Suggested Citation

  • Amr Hosny, 2012. "Algeria’s Trade with GAFTA Countries: A Synthetic Control Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(1), pages 35-42, September.
  • Handle: RePEc:spr:trstrv:v:19:y:2012:i:1:p:35-42
    DOI: 10.1007/s11300-012-0228-4
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    References listed on IDEAS

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    1. Tamim Bayoumi & Barry Eichengreen, 1997. "Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA," NBER Chapters,in: Regionalism versus Multilateral Trade Arrangements, NBER-EASE Volume 6, pages 141-168 National Bureau of Economic Research, Inc.
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    3. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    4. Soloaga, Isidro & Alan Wintersb, L., 2001. "Regionalism in the nineties: what effect on trade?," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 1-29, March.
    5. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May.
    6. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
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    Cited by:

    1. Swarnali Ahmed Hannan, 2016. "The Impact of Trade Agreements; New Approach, New Insights," IMF Working Papers 16/117, International Monetary Fund.
    2. Ferman, Bruno & Pinto, Cristine Campos de Xavier & Possebom, Vitor Augusto, 2016. "Cherry picking with synthetic controls," Textos para discussão 420, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    3. Ferman, Bruno & Pinto, Cristine, 2016. "Revisiting the Synthetic Control Estimator," MPRA Paper 73982, University Library of Munich, Germany.
    4. Klößner, Stefan & Pfeifer, Gregor, 2015. "Synthesizing Cash for Clunkers: Stabilizing the Car Market, Hurting the Environment," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113207, Verein für Socialpolitik / German Economic Association.
    5. Demko, Iryna & Edward, Jaenicke, 2016. "Policy Impacts from U.S. Organic Equivalency with the European Union," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235887, Agricultural and Applied Economics Association.
    6. Kaul, Ashok & Klößner, Stefan & Pfeifer, Gregor & Schieler, Manuel, 2015. "Synthetic Control Methods: Never Use All Pre-Intervention Outcomes Together With Covariates," MPRA Paper 83790, University Library of Munich, Germany.
    7. Abdessalem Abassi & Lota Dabio Tamini, 2016. "Trade performance and potential of North African countries: An application of a stochastic frontier gravity model," Cahiers de recherche CREATE 2016-4, CREATE.

    More about this item

    Keywords

    GAFTA; Regional economic integration; Synthetic control methods; Treatment effect; Gravity equation; C21; F15;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F15 - International Economics - - Trade - - - Economic Integration

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