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The Effect of GATT / WTO on Export and Import Price Volatility
Author(s) -
Cao Vinh T. H.,
Flach Lisandra
Publication year - 2015
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12228
Subject(s) - endogeneity , economics , volatility (finance) , accession , international economics , international trade , monetary economics , econometrics , european union
Despite much interest and discussion concerning the trade‐promoting effects of membership in multilateral trade agreements, little is known about the effect of membership on world trade prices. This paper fills this gap by studying the effects of membership on export and import price volatility. We document a surprisingly strong and robust empirical regularity: GATT / WTO membership reduces the volatility of prices over time for both import and export countries, with similar results found for free trade agreements. We show that results are not driven by sample selection or endogeneity concerns and that the effect is captured by members subject to rigorous accession procedures.