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On the Robustness of the Trade-Inducing Effects of Trade Agreements and Currency Unions

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  • Jayjit Roy

    () (SMU)

Abstract

Regional trade agreements (RTAs) and currency unions (CUs) share the characteristic of being potentially endogenous trade cost proxies in gravity equations. In both cases, this problem is magnified by the paucity of reliable instruments. Instead of resorting to the often-employed alternative of panel data in order to address selection on just the time-invariant unobservables, this paper provides the first empirical analysis of the extent to which the positive association between CU or RTA membership and bilateral trade can be considered causal. Despite not identifying point estimates, striking results are obtained. Although most cross-sections find both RTAs and CUs to be associated with increased bilateral trade, the evidence in favor of a causal effect is strong only for CUs, and is also witnessed at the extensive margin of trade.

Suggested Citation

  • Jayjit Roy, 2009. "On the Robustness of the Trade-Inducing Effects of Trade Agreements and Currency Unions," Departmental Working Papers 0906, Southern Methodist University, Department of Economics.
  • Handle: RePEc:smu:ecowpa:0906
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    Cited by:

    1. Salvador Gil-Pareja & Rafael Llorca-Vivero & José Antonio Martínez-Serrano, 2018. "The happy few: cross-country evidence of the euro effect on trade," Working Papers 1803, Department of Applied Economics II, Universidad de Valencia.
    2. Roy, Jayjit, 2011. "Is the WTO mystery really solved?," Economics Letters, Elsevier, vol. 113(2), pages 127-130.
    3. Mohd Hussain Kunroo & Irfan Ahmad Sofi & Naushad Ali Azad, 2016. "Trade implications of the Euro in EMU countries: a panel gravity analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(2), pages 391-413, May.
    4. repec:eee:riibaf:v:42:y:2017:i:c:p:353-364 is not listed on IDEAS

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    • F1 - International Economics - - Trade

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