Evaluating Growth Volatility Susceptibility within Regional Free Trade Agreements

International Journal of Finance and Economics, 16(1), 32-40, 2011

20 Pages Posted: 5 Sep 2012 Last revised: 31 Jan 2014

See all articles by Jeffrey Edwards

Jeffrey Edwards

North Carolina Agricultural and Technical State University

Vance Ginn

Texas Public Policy Foundation

Date Written: September 4, 2012

Abstract

This paper looks at the effects on trading partners that are included and not included in a Regional Free Trade Agreement (RFTA). Using the system GMM methodology, we consider six control variables to determine whether the volatility is more pronounced in non-RFTA countries (Type 1) or countries that are RFTA trading partners (Type 2). The results are three-fold: 1. whether a country is in an agreement or not there is statistically significant volatility spillover from trading partner economies, 2. being in a RFTA does not insulate oneself from non-RFTA countries, and 3. participating in a RFTA actually increases susceptibility to volatility from other RFTA countries. We conclude that it may be more harmful to be in a RFTA because of the increase in volatility exposure among trading partners relative to not joining a RFTA.

Keywords: Volatility, Development, GMM, RFTA

JEL Classification: O11, O16, O18, O19

Suggested Citation

Edwards, Jeffrey and Ginn, Vance, Evaluating Growth Volatility Susceptibility within Regional Free Trade Agreements (September 4, 2012). International Journal of Finance and Economics, 16(1), 32-40, 2011. Available at SSRN: https://ssrn.com/abstract=2141585

Jeffrey Edwards

North Carolina Agricultural and Technical State University ( email )

1601 E. Market Street
Greensboro, NC 27411
United States

Vance Ginn (Contact Author)

Texas Public Policy Foundation ( email )

901 Congress Avenue
Austin, TX 78701
United States
7134785255 (Phone)

HOME PAGE: http://www.texaspolicy.com/experts/detail/vance-ginn

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