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Are Free Trade Agreements Contagious?

  • Baldwin, Richard
  • Jaimovich, Dany

This paper presents empirical evidence on the extent to which FTAs are "contagious", using empirical techniques inspired by the study of contagion in exchange rate crises. Applying a series of different econometric techniques, it tests the null hypothesis that the signing of an FTA between one nation's trade partners has no affect on the probability of the nation signing a new FTA. The hypothesis is tested against other political, economical and geographical determinants of the FTA formation previously stated in the literature, finding evidence that the contagion phenomenon is present in different specifications and samples.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/17291/1/070ccesDP_12.pdf
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Paper provided by Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University in its series CCES Discussion Paper Series with number 12.

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Length: 29 p.
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:hit:ccesdp:12
Note: This version: 09 March 2009
Contact details of provider: Postal: 2-1 Naka, Kunitachi City, Tokyo 186-8601
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Web page: http://www.econ.hit-u.ac.jp/~cces/

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  1. Mardi Dungey & Renee Fry & Vance Martin & Brenda González-Hermosillo, 2004. "Empirical Modeling of Contagion; A Review of Methodologies," IMF Working Papers 04/78, International Monetary Fund.
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  8. Richard E. Baldwin & Frederic Robert-Nicoud, 2002. "Entry and Asymmetric Lobbying: Why Governments Pick Losers," NBER Working Papers 8756, National Bureau of Economic Research, Inc.
  9. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8m2hh491 is not listed on IDEAS
  10. Baldwin, Richard & Jaimovich, Dany, 2010. "Are Free Trade Agreements Contagious?," CEPR Discussion Papers 7904, C.E.P.R. Discussion Papers.
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  14. Bhagwati, Jagdish, 2008. "Termites in the Trading System: How Preferential Agreements Undermine Free Trade," OUP Catalogue, Oxford University Press, number 9780195331653, March.
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  16. Jonah B. Gelbach & Doug Miller, 2009. "Robust Inference with Multi-way Clustering," Working Papers 99, University of California, Davis, Department of Economics.
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  24. Martin Gassebner & Noel Gaston & Michael Lamla, 2008. "The Inverse Domino Effect: Are Economic Reforms Contagious?," KOF Working papers 08-187, KOF Swiss Economic Institute, ETH Zurich.
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  27. Pravin Krishna, 1998. "Regionalism And Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 227-250, February.
  28. Dany Jaimovich, 2012. "A Bayesian spatial probit estimation of Free Trade Agreement contagion," Applied Economics Letters, Taylor & Francis Journals, vol. 19(6), pages 579-583, April.
  29. Riezman, Raymond, 1985. "Customs unions and the core," Journal of International Economics, Elsevier, vol. 19(3-4), pages 355-365, November.
  30. Tammy Holmes, 2005. "What Drives Regional Trade Agreements that Work?," IHEID Working Papers 07-2005, Economics Section, The Graduate Institute of International Studies.
  31. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
  32. Melatos, Mark & Woodland, Alan, 2007. "Endogenous trade bloc formation in an asymmetric world," European Economic Review, Elsevier, vol. 51(4), pages 901-924, May.
  33. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
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  35. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
  36. Tovar, Patricia, 2009. "The effects of loss aversion on trade policy: Theory and evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 154-167, June.
  37. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
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  39. Caroline Freund, 2000. "Different Paths To Free Trade: The Gains From Regionalism," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1317-1341, November.
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  41. Marcel Fafchamps & Flore Gubert, 2007. "Risk Sharing and Network Formation," American Economic Review, American Economic Association, vol. 97(2), pages 75-79, May.
  42. Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2010. "The geography of conflicts and free trade agreements," CEPR Discussion Papers 7740, C.E.P.R. Discussion Papers.
  43. Scott L. Baier & Jeffrey H. Bergstrand & Peter Egger, 2007. "The New Regionalism: Causes and Consequences," Economie Internationale, CEPII research center, issue 109, pages 9-29.
  44. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
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  46. Pédussel Wu, Jennifer, 2004. "Measuring and explaining levels of regional economic integration," ZEI Working Papers B 12-2004, ZEI - Center for European Integration Studies, University of Bonn.
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