Third-Country Effects on the Formation of Free Trade Agreements
The recent proliferation of free trade agreements (FTAs) has resulted in an in- creasingly complex network of preferential trading relationships. The economics literature has generally examined the formation of FTAs as a function of the par- ticipating countries' economic characteristics alone. In this paper, we show both theoretically and empirically that the decision to enter into an FTA is also crucially dependent on the participating countries' existing FTA relationships with third countries. Accounting for the interdependence of FTAs helps to explain a significant fraction of FTA formations that would not otherwise be predicted by countries' economic characteristics.
|Date of creation:||Apr 2010|
|Date of revision:|
|Publication status:||Forthcoming in Journal of International Economics|
|Contact details of provider:|| Web page: http://www.gwu.edu/~iiep/|
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