Free Trade Areas and Intra-Regional Trade: The Case of ASEAN
The Singapore Economic Review (SER)
Posted: 25 Apr 2010 Last revised: 4 Jun 2010
Date Written: August 1, 2009
We study the effects of free trade areas on bilateral trade flows. We review and extend the previous empirical literature by embarking on the modelling of unobserved heterogeneity. We apply our preferred model to the case of the Asean Free Trade Area (AFTA). The estimation results suggest that there has been a positive effect of AFTA. This empirical finding is contrary to earlier estimation results, which are typically not so positive about AFTA. It is our impression that these earlier estimates on AFTA are confounded with the effects of unobserved determinants of trade.
Keywords: AFTA, ASEAN, free trade area, gravity model, panel data
JEL Classification: F15, C23
Suggested Citation: Suggested Citation