Are the New Trading Blocs Building or Stumbling Blocks? A Gravity Model Using Panel Data

Abstract:     
We will be asking ourselves if the trading blocs created or renewed since the end of the 1980s favor the multilateralization of trade, and so constitute building or stumbling blocks. In a gravity model using panel data, we estimate a set of three regional dummies representative of intra-bloc trade, extra-bloc exports and extra-bloc imports. Taking the resulting three coefficients as a starting point, we propose an original typology of trade creations / diversions and of trading blocs. In applying it to our results, all the groups chosen as well as the Economic and Monetary Union, are shown to be building blocks. No trade diversion is noted, with the exception of an export diversion brought about by North American Free Trade Agreement.

Number of Pages in PDF File: 34

Keywords: Trade Integration, Gravity Model, Trade Creation/Diversion, Building/Stumbling Blocks

JEL Classification: F13, F15, C23

working papers series