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

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  • Amr Hosny

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

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  • 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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    Cited by:

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    7. Mrs. Swarnali A Hannan, 2016. "The Impact of Trade Agreements: New Approach, New Insights," IMF Working Papers 2016/117, International Monetary Fund.
    8. Ferman, Bruno & Pinto, Cristine, 2016. "Revisiting the Synthetic Control Estimator," MPRA Paper 73982, University Library of Munich, Germany.
    9. Klößner, Stefan & Pfeifer, Gregor, 2015. "Synthesizing Cash for Clunkers: Stabilizing the Car Market, Hurting the Environment," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113207, Verein für Socialpolitik / German Economic Association.
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    More about this item

    Keywords

    GAFTA; Regional economic integration; Synthetic control methods; Treatment effect; Gravity equation; C21; F15;
    All these keywords.

    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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