Who benefits from regional trade agreements? The view from the stock market

Christoph Moser () and Andrew Rose

European Economic Review, 2014, vol. 68, issue C, 31-47

Abstract: The consequences of regional trade agreements (RTAs) on countries׳ welfare are disputed. In this paper, we assess these effects using stock returns from a recent data set that spans over 200 RTA announcements, 80 economies, and 20 years. We measure the effects of news concerning RTAs on the returns of national stock markets, after adjusting these returns for international stock market movements. We then link these abnormal returns to features of the RTA members and the agreements themselves. We find strong evidence of the natural trading partner hypothesis; stock markets rise more when RTAs are signed between countries that already engage in high volumes of trade. Stock markets also rise more when poorer countries sign RTAs, and when RTAs are signed with smaller partners. We also find no evidence that capital markets expect significant trade diversion effects.

Keywords: Trade agreements; Event study; Natural partners; Low income; International finance (search for similar items in EconPapers)
JEL-codes: F10 F13 F30 G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Related works:
Working Paper: Who Benefits from Regional Trade Agreements? The View from the Stock Market (2011)
Working Paper: Who Benefits from Regional Trade Agreements? The View from the Stock Market (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:68:y:2014:i:c:p:31-47

DOI: 10.1016/j.euroecorev.2014.01.012

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