Regional Trade Agreements Revisited

The gravity model is a workhorse for econometric studies of the impact of regional trade agreements (RTAs). Despite its initial lack of theoretical basis, the model has been successfully derived from various trade theories. The latest theoretical derivation by Anderson and van Wincoop (2003) reveals...

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Main Author: TAN, Hui Chin
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Language:English
Published: Institutional Knowledge at Singapore Management University 2007
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Online Access:https://ink.library.smu.edu.sg/etd_coll/35
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1034&context=etd_coll
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spelling sg-smu-ink.etd_coll-10342011-03-10T01:36:12Z Regional Trade Agreements Revisited TAN, Hui Chin The gravity model is a workhorse for econometric studies of the impact of regional trade agreements (RTAs). Despite its initial lack of theoretical basis, the model has been successfully derived from various trade theories. The latest theoretical derivation by Anderson and van Wincoop (2003) reveals that prior gravity studies have made the critical error of omitting the multilateral resistance variable, which results in biased estimates. Other recent studies have highlighted empirical issues with the commonly used procedure of log-linearizing the gravity model and estimating the parameters using Ordinary Least Squares (OLS) regression. Silva and Tenreyro (2006) point out that this method yields inconsistent estimates in the presence of heteroskedasticity. Helpman, Melitz and Rubinstein (2004) show that the concomitant practice of dropping observations with zero trade values (because the log-linearized model is not defined for such observations) will also give rise to biased results. To deal with these two issues of inconsistency and bias, we estimate the gravity model in its multiplicative form. Both crosssectional and panel data analysis are performed, employing Poisson Pseudo Maximum Likelihood Estimator and Poisson Quasi-Conditional Maximum Likelihood Estimator respectively. Whilst analyzing the impact of RTAs in the light of the new estimation methods, this study will also re-evaluate the impact of the Asean Free Trade Area in the context of other major RTAs. 2007-01-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/etd_coll/35 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1034&context=etd_coll http://creativecommons.org/licenses/by-nc-nd/4.0/ Dissertations and Theses Collection (Open Access) eng Institutional Knowledge at Singapore Management University gravity model intraregional trade Ordinary Least Squares regional trade agreements trade diversion Econometrics International Business
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic gravity model
intraregional trade
Ordinary Least Squares
regional trade agreements
trade diversion
Econometrics
International Business
spellingShingle gravity model
intraregional trade
Ordinary Least Squares
regional trade agreements
trade diversion
Econometrics
International Business
TAN, Hui Chin
Regional Trade Agreements Revisited
description The gravity model is a workhorse for econometric studies of the impact of regional trade agreements (RTAs). Despite its initial lack of theoretical basis, the model has been successfully derived from various trade theories. The latest theoretical derivation by Anderson and van Wincoop (2003) reveals that prior gravity studies have made the critical error of omitting the multilateral resistance variable, which results in biased estimates. Other recent studies have highlighted empirical issues with the commonly used procedure of log-linearizing the gravity model and estimating the parameters using Ordinary Least Squares (OLS) regression. Silva and Tenreyro (2006) point out that this method yields inconsistent estimates in the presence of heteroskedasticity. Helpman, Melitz and Rubinstein (2004) show that the concomitant practice of dropping observations with zero trade values (because the log-linearized model is not defined for such observations) will also give rise to biased results. To deal with these two issues of inconsistency and bias, we estimate the gravity model in its multiplicative form. Both crosssectional and panel data analysis are performed, employing Poisson Pseudo Maximum Likelihood Estimator and Poisson Quasi-Conditional Maximum Likelihood Estimator respectively. Whilst analyzing the impact of RTAs in the light of the new estimation methods, this study will also re-evaluate the impact of the Asean Free Trade Area in the context of other major RTAs.
format text
author TAN, Hui Chin
author_facet TAN, Hui Chin
author_sort TAN, Hui Chin
title Regional Trade Agreements Revisited
title_short Regional Trade Agreements Revisited
title_full Regional Trade Agreements Revisited
title_fullStr Regional Trade Agreements Revisited
title_full_unstemmed Regional Trade Agreements Revisited
title_sort regional trade agreements revisited
publisher Institutional Knowledge at Singapore Management University
publishDate 2007
url https://ink.library.smu.edu.sg/etd_coll/35
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1034&context=etd_coll
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