Time-Dependent Efficiency of Free Trade Agreements: The Case of Slovenia and the CEFTA Agreement

Joze Damijan and Igor Masten

LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven

Abstract: In international trade literature, there is a common feature that the abolishment of barriers to trade leads to the expansion of trade flows. Most of the empirical studies aiming at simulation of welfare effects of trade liberalization explicitly make use of this direct tariff reduction - trade expansion mechanism. The present paper, on the contrary, explores the time-dependent efficiency of free trade agreements (FTAs) in a panel framework using static and dynamic model specifications. It shows that trade liberalization per se needs time to become efficient and that immediately after the enforcement of the FTA, the autonomous factors (such as domestic demand for particular import goods) are of great importance, since they may or may not stimulate expansion of bilateral trade flows. Using an illustrative case of rapid expansion of Slovenian imports from other Central and Eastern European countries (CEECs) in the period 1993?998, the paper demonstrates that tariff reductions become effective in the second to third year after enforcement of the FTA. In addition, it is shown that there is a non-linear relationship between tariff reductions and trade expansions since new business connections have to be established.

Keywords: Trade Liberalization; Efficiency of Free-Trade Agreements (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2002
New Economics Papers: this item is included in nep-mfd and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.econ.kuleuven.be/licos/publications/dp/dp117.pdf

Related works:
Journal Article: Time Dependent Efficiency of Free Trade Agreements - The Case of Slovenia and the CEFTA Agreement (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lic:licosd:11702

Access Statistics for this paper

More papers in LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven Contact information at EDIRC.
Bibliographic data for series maintained by ().