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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
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Web page: http://www.econ.hit-u.ac.jp/~cces/

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  1. Baldwin, Richard, 1993. "A Domino Theory of Regionalism," CEPR Discussion Papers 857, C.E.P.R. Discussion Papers.
  2. Vicard, Vincent, 2012. "Trade, conflict, and political integration: Explaining the heterogeneity of regional trade agreements," European Economic Review, Elsevier, vol. 56(1), pages 54-71.
  3. André Sapir, 2001. "Domino effects in Western European trade, 1960-92," ULB Institutional Repository 2013/8138, ULB -- Universite Libre de Bruxelles.
  4. Baldwin, Richard & Jaimovich, Dany, 2009. "Are Free Trade Agreements Contagious?," CCES Discussion Paper Series 12, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
  5. Caroline Freund & Emanuel Ornelas, 2009. "Regional trade agreements," LSE Research Online Documents on Economics 28697, London School of Economics and Political Science, LSE Library.
  6. Martin Gassebner & Noel Gaston & Michael Lamla, 2007. "The Inverse Domino Effect: Are Economic Reforms Contagious?," Monash Economics Working Papers 31-07, Monash University, Department of Economics.
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  8. Riezman, R., 1997. "Can Bilateral Trade Agreements Help Induce Free Trade," Working Papers 97-01, University of Iowa, Department of Economics.
  9. Pravin Krishna, . "Regionalism and Multilaterialism: A Political Economy Approach," Working Papers 96-5, Brown University, Department of Economics.
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  11. 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.
  12. Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2010. "The geography of conflicts and free trade agreements," CEPREMAP Working Papers (Docweb) 1019, CEPREMAP.
  13. 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.
  14. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
  15. Mansfield, Edward D. & Pevehouse, Jon C., 2000. "Trade Blocs, Trade Flows, and International Conflict," International Organization, Cambridge University Press, vol. 54(04), pages 775-808, September.
  16. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  17. Paul Krugman, 1991. "The move toward free trade zones," Economic Review, Federal Reserve Bank of Kansas City, issue Nov, pages 5-25.
  18. Baldwin, Richard, 1997. "The Causes of Regionalism," CEPR Discussion Papers 1599, C.E.P.R. Discussion Papers.
  19. Neal, Larry & Barbezat, Daniel, 1998. "The Economics of the European Union and the Economies of Europe," OUP Catalogue, Oxford University Press, number 9780195110685, March.
  20. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
  21. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
  22. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and asymmetric lobbying: why governments pick losers," LSE Research Online Documents on Economics 19726, London School of Economics and Political Science, LSE Library.
  23. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade not War?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00293018, HAL.
  24. Vance L. Martin & Brenda Gonzalez-Hermosillo, & Mardi Dungey & Renee A. Fry, 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Australasian Meetings 243, Econometric Society.
  25. 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.
  26. 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.
  27. Baldwin, Richard & Rieder, Roland, 2007. "A Test of Endogenous Trade Bloc Formation Theory on EU Data," CEPR Discussion Papers 6389, C.E.P.R. Discussion Papers.
  28. Tammy Holmes, 2005. "What Drives Regional Trade Agreements that Work?," IHEID Working Papers 07-2005, Economics Section, The Graduate Institute of International Studies.
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  31. Vincent Vicard, 2006. "Trade, Conflicts, and Political Integration: the Regional Interplays," CESifo Working Paper Series 1839, CESifo Group Munich.
  32. Neumayer, Eric & Plümper, Thomas, 2010. "Spatial Effects in Dyadic Data," International Organization, Cambridge University Press, vol. 64(01), pages 145-166, January.
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  34. 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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  36. King, Gary & Zeng, Langche, 2001. "Explaining Rare Events in International Relations," International Organization, Cambridge University Press, vol. 55(03), pages 693-715, June.
  37. Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007. "Negotiating free trade," Journal of International Economics, Elsevier, vol. 73(1), pages 1-30, September.
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  39. 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.
  40. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The Magazine for Economic Performance 313, Centre for Economic Performance, LSE.
  41. Baldwin, Richard, 2006. "Managing the Noodle Bowl: The Fragility of East Asian Regionalism," CEPR Discussion Papers 5561, C.E.P.R. Discussion Papers.
  42. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  43. 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.
  44. Dany Jaimovich, 2010. "A Bayesian spatial probit estimation of Free Trade Agreement contagion," IHEID Working Papers 07-2010, Economics Section, The Graduate Institute of International Studies.
  45. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  46. Baldwin, Richard, 2011. "21st century regionalism: Filling the gap between 21st century trade and 20th century trade rules," WTO Staff Working Papers ERSD-2011-08, .
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