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Trade Creation And Trade Diversion Under Mercorsur: A Global Intertemporal General Equilibrium Analysis

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  • Diao, Xinshen
  • Somwaru, Agapi

Abstract

A multi-region, multi-sector global intertemporal general equilibrium model is constructed to analyze dynamic adjustments following the establishment of the Southern Common Market (MERCOSUR). The study focuses on regional trade integration effects as well as third party spillover effects. By taking into account both transitional and steady state adjustments in consumption, production, and investments, we observe significant shifts of trade diversion away from the non-member trading partners to the member countries. We also find that, following the MERCOSUR's common external tariffication, growth of intra trade would likely be accompanied by increases in trade between Mercosur and other countries.

Suggested Citation

  • Diao, Xinshen & Somwaru, Agapi, 1997. "Trade Creation And Trade Diversion Under Mercorsur: A Global Intertemporal General Equilibrium Analysis," Staff Papers 13977, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umaesp:13977
    DOI: 10.22004/ag.econ.13977
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    Cited by:

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