Trade Creation and the Status of FTAs: Empirical Evidence from East Asia

Review of World Economics, Vol. 147, No. 3, pp. 429-456

Posted: 14 Nov 2011

See all articles by Florian Mölders

Florian Mölders

German Institute for Economic Research (DIW Berlin)

Ulrich Volz

University of London - School of Oriental and African Studies (SOAS) - Economics; Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE)

Date Written: November 13, 2011

Abstract

East Asia has been considered a latecomer with respect to Free Trade Agreements (FTAs). Since the turn of the last century, however, FTAs with East Asian participation have seen an intra- and extra-regional expansion. Many trade initiatives have been proposed, negotiated or even implemented. This introduces interesting perspectives for the analysis of trade agreements regarding their anticipatory trade effects. This paper focuses on the trade impact of FTAs at different stages that East Asian economies participate in. The central part of this study is an econometric analysis that applies panel data to the gravity model of international trade flows. We augment the traditional model with variables to estimate trade effects of bilateral and multilateral agreements and year-to-year changes in the stages of their implementation. Our results reveal that there exist anticipatory effects preceding the actual implementation of bilateral FTAs with East Asian participation. Further, anticipation effects are larger for bilateral than for multilateral agreements, possibly because the realisation of bilateral agreements is considered more realistic.

Keywords: Free Trade Agreements, Trade, East Asia, Gravity model, Panel data

JEL Classification: F13

Suggested Citation

Mölders, Florian and Volz, Ulrich, Trade Creation and the Status of FTAs: Empirical Evidence from East Asia (November 13, 2011). Review of World Economics, Vol. 147, No. 3, pp. 429-456. Available at SSRN: https://ssrn.com/abstract=1959069

Florian Mölders

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Ulrich Volz (Contact Author)

University of London - School of Oriental and African Studies (SOAS) - Economics

London, WC1E 7HU
United Kingdom

Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE) ( email )

Tulpenfeld 4
Bonn, 53113
Germany

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