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A time series approach to study the dynamic effects of bilateral trade agreements

Author

Listed:
  • Blanca Jiménez-García

    (Banco de España)

  • Julio Rodríguez

    (Universidad Autónoma de Madrid)

Abstract

In this work, the effects of 103 bilateral regional trade agreements (RTAs: partial scope agreements — PSAs — and free trade agreements — FTAs) are studied in a dynamic way. The analysis of quarterly trade flows from Q4-1982 to Q4-2018 shows dynamic differences between RTAs and among trade partners. Results show that countries benefit unevenly from bilateral RTAs and that their economic size is not determinant. The positive global trade trend since the 1990s and the negative effect of the 2008 economic crisis are captured by the factor analysis in order to study specifically how trade agreements affect bilateral trade asymmetrically. On average, RTAs promote a 10% increase in bilateral trade flows above the mean trend, but PSAs tend to enhance bilateral trade more than FTAs (21% compared to 9%). Additionally, PSAs gather most of the effects during the first four quarters after the agreements are enforced whereas FTAs have longer effects over time. The current study allows a classification of bilateral trade series in homogeneous groups according to the dynamic impact of the bilateral RTAs by the means of a cluster analysis. Heterogeneity between clusters is therefore explored. Moreover, a difference concerning the economic crisis starting in 2008 is noticed: overall, for agreements in force before 2008, their impact on bilateral trade is positive (30%) while it is negative for agreements signed after 2008 (− 9%). This indicates that RTAs play a heterogeneous role as a smoothing cycle mechanism. Finally, evidence of the anticipation effect is found.

Suggested Citation

  • Blanca Jiménez-García & Julio Rodríguez, 2022. "A time series approach to study the dynamic effects of bilateral trade agreements," International Economics and Economic Policy, Springer, vol. 19(3), pages 615-643, July.
    • Handle: RePEc:kap:iecepo:v:19:y:2022:i:3:d:10.1007_s10368-022-00529-6
    DOI: 10.1007/s10368-022-00529-6
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    References listed on IDEAS

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