Does A Regional Trade Agreement Lessen or Exacerbate Growth Volatility? An Empirical Investigation

July 28, 2015

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Format: Chicago

Kangni R Kpodar, and Patrick A. Imam Does A Regional Trade Agreement Lessen or Exacerbate Growth Volatility? An Empirical Investigation, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper assesses how regional trade agreements (RTAs) impact growth volatility on a worldwide sample of 170 countries with data spanning the period 1978-2012. Notwithstanding concerns that trade openness through RTAs can heighten exposure to shocks, in particular when it leads to increased product specialization, RTAs through enhanced policy credibility, improved policy coordination, and reduced risk of conflicts can ease growth volatility. Empirical estimations suggest the benefits outweigh the costs as RTAs are consistently associated with lower growth volatility, after controlling for trade openness and other determinants of growth volatility. Furthermore, regression results also suggest that countries that are more prone to shocks are more likely to join a RTA, in particular with countries with relatively less volatile growth, additionally enhancing the stabilization effect.

Subject: Exports, Imports, International trade, Regional trade, Terms of trade, Trade agreements

Keywords: Affect growth volatility, Exports, Global, Growth rate, Growth volatility, Imports, Mega-RTAs agreement, Regional trade, Regional trade agreement, RTA dummy variable, RTA member, RTA member country, Standard deviation, Terms of trade, Trade agreements, Trade creation, Trade openness, Trade partner, West Africa, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/177
Stock No:

WPIEA2015177
ISBN:

9781513540443
ISSN:

1018-5941

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