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Competitio

Évf. 21 szám 1-2 (2022)
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The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review

Megjelent:
2022-12-02
DOI Linkhttps://doi.org/10.21845/comp/2022/1-2/3
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MCHANI SIBULELE
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Kulcsszavak
gravity model RTA OLS PPML
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Copyright (c) 2022 SIBULELE MCHANI

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This work is licensed under a Creative Commons Attribution 4.0 International License.

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Kiválasztott formátum: APA
MCHANI, S. (2022). The impact of regional trade agreements on bilateral trade flows: A Systemic Literature Review. Competitio, 21(1-2), 119-133. https://doi.org/10.21845/comp/2022/1-2/3
Beküldött 2021-11-18
Elfogadott 2022-03-16
Publikált 2022-12-02
Absztrakt

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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