Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/93003 
Year of Publication: 
2013
Series/Report no.: 
IAI Discussion Papers No. 224
Publisher: 
Georg-August-Universität Göttingen, Ibero-America Institute for Economic Research (IAI), Göttingen
Abstract: 
This study uses a theoretically justified gravity model of trade to examine the impact of the ASEAN-China Free Trade Agreement (ACFTA) on exports, focusing on trade creation and diversion effects. The model is tested on a sample of 31 countries over the period dating from 1995 to 2010 using aggregate and disaggregated export data for agricultural raw materials, manufactured goods and chemical products, as well as machinery and transport equipment. In order to obtain unbiased estimates, multilateral resistance terms are included as regressors and the endogeneity bias of the FTA variables is addressed by controlling for the unobserved specific heterogeneity that is specific to each trade flow. The results indicate that ACFTA leads to substantial and significant trade creation. Using disaggregated data, the significant and positive relationship between exports and ACFTA can be confirmed in the case of both manufactured goods and also chemical products.
Subjects: 
gravity model
panel data
trade creation and trade diversion effects
ACFTA
JEL: 
F14
F15
Document Type: 
Working Paper

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