The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review
This paper reviews the theoretical and empirical literature on the impact of regional trade agreements on trade. The empirical literature is arranged based on the econometric methods used to estimate the gravity model. Advantages and disadvantages of each method were highlighted. Papers covering RT...
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| Format: | Article |
| Language: | English |
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University of Debrecen, Faculty of Economics and Business
2022-12-01
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| Series: | Competitio |
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| Online Access: | https://ojs.lib.unideb.hu/competitio/article/view/10349 |
| _version_ | 1827594211230220288 |
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| author | SIBULELE MCHANI |
| author_facet | SIBULELE MCHANI |
| author_sort | SIBULELE MCHANI |
| collection | DOAJ |
| description |
This paper reviews the theoretical and empirical literature on the impact of regional trade agreements on trade. The empirical literature is arranged based on the econometric
methods used to estimate the gravity model. Advantages and disadvantages of each method were highlighted. Papers covering RTAs from Africa, Asia, the Americas, and Europe were reviewed to gain a more representative understanding. The covered empirical literature suggests that the Poisson Pseudo Maximum Likelihood (PPML) estimator is more reliable than OLS in estimating gravity models, as it can deal with zero trade flows. The Fixed Effects (FE) approach produces more consistent estimates than the Random Effects (RE) approach when quantifying the effects of RTAs. This is because it allows one to control for the unobserved time-invariant variables. Surprisingly, the covered literature suggests that a great majority of African RTAs generated trade, regardless of the method of estimation used.
Journal of Economic Literature (JEL) codes: F13, F15
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| first_indexed | 2024-03-09T02:29:33Z |
| format | Article |
| id | doaj.art-5ee4922fa9584bd2aaf1cc1733211ba3 |
| institution | Directory Open Access Journal |
| issn | 1588-9645 2939-7324 |
| language | English |
| last_indexed | 2024-03-09T02:29:33Z |
| publishDate | 2022-12-01 |
| publisher | University of Debrecen, Faculty of Economics and Business |
| record_format | Article |
| series | Competitio |
| spelling | doaj.art-5ee4922fa9584bd2aaf1cc1733211ba32023-12-06T15:40:39ZengUniversity of Debrecen, Faculty of Economics and BusinessCompetitio1588-96452939-73242022-12-01211-210.21845/comp/2022/1-2/3The impact of regional trade agreements on bilateral trade flows: A Systemic Literature ReviewSIBULELE MCHANI0https://orcid.org/0000-0002-0328-1974University of Debrecen Ihrig Károly Doctoral School This paper reviews the theoretical and empirical literature on the impact of regional trade agreements on trade. The empirical literature is arranged based on the econometric methods used to estimate the gravity model. Advantages and disadvantages of each method were highlighted. Papers covering RTAs from Africa, Asia, the Americas, and Europe were reviewed to gain a more representative understanding. The covered empirical literature suggests that the Poisson Pseudo Maximum Likelihood (PPML) estimator is more reliable than OLS in estimating gravity models, as it can deal with zero trade flows. The Fixed Effects (FE) approach produces more consistent estimates than the Random Effects (RE) approach when quantifying the effects of RTAs. This is because it allows one to control for the unobserved time-invariant variables. Surprisingly, the covered literature suggests that a great majority of African RTAs generated trade, regardless of the method of estimation used. Journal of Economic Literature (JEL) codes: F13, F15 https://ojs.lib.unideb.hu/competitio/article/view/10349gravity modelRTAOLSPPML |
| spellingShingle | SIBULELE MCHANI The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review Competitio gravity model RTA OLS PPML |
| title | The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review |
| title_full | The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review |
| title_fullStr | The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review |
| title_full_unstemmed | The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review |
| title_short | The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review |
| title_sort | impact of regional trade agreements on bilateral trade flows a systemic literature review |
| topic | gravity model RTA OLS PPML |
| url | https://ojs.lib.unideb.hu/competitio/article/view/10349 |
| work_keys_str_mv | AT sibulelemchani theimpactofregionaltradeagreementsonbilateraltradeflowsasystemicliteraturereview AT sibulelemchani impactofregionaltradeagreementsonbilateraltradeflowsasystemicliteraturereview |