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Have Free Trade Agreements Created Trade? Evidence from CEPA
Author(s) -
Zhou Yonghong
Publication year - 2019
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12198
Subject(s) - endogeneity , economics , gravity equation , gravity model of trade , product (mathematics) , trade barrier , international trade , trade creation , bilateral trade , difference in differences , contrast (vision) , free trade , control (management) , international economics , econometrics , international free trade agreement , trade diversion , computer science , geometry , mathematics , china , political science , law , management , artificial intelligence
This paper revisits the issue of trade creation effects in multi‐stage free trade agreements (FTA). In contrast to the empirical studies that use the gravity equation to study trade creation effects, we apply a triple difference in differences approach to resolve their shortcomings, including factors being omitted and endogeneity. After the identification of treatment and control groups at the eight‐digit Harmonized System (HS) code product level, the regression analysis results show that there are no significant trade creation effects with the FTA, suggesting that the role of FTA may be a signalling beyond trade.