An Oil-Producing State's Ability to Cope after a Regional Free Trade Agreement--The Case of Texas and NAFTA

Vance Ginn and Travis Roach

The International Trade Journal, 2015, vol. 29, issue 4, 309-336

Abstract: This article examines the potential economic effects that the 1994 North American Free Trade Agreement (NAFTA) had on Texas--an oil-producing, large border state. We estimate a five-variable vector autoregressive (VAR) model with quarterly data from January 1976 to March 2011 and construct a structural VAR representation by imposing long-term restrictions to identify U.S. aggregate, oil price, and Texas-specific shocks. After comparing responses to these structural shocks before and after NAFTA, our results suggest that NAFTA contributed to Texas' economy, becoming more resilient to oil price and non-Texas disruptions.

Date: 2015
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DOI: 10.1080/08853908.2015.1054968

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