Have Free Trade Agreements Created Trade? Evidence from CEPA

Yonghong Zhou

Pacific Economic Review, 2019, vol. 24, issue 4, 550-569

Abstract: 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.

Date: 2019
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https://doi.org/10.1111/1468-0106.12198

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