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Does A Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation

Kpodar Roland Kangni and Patrick Imam
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Kpodar Roland Kangni: International Monetary Fund (IMF)

No P137, Working Papers from FERDI

Abstract: This paper assesses how regional trade agreements (RTAs) impact growth volatility on a worldwide sample of 170 countries with data spanning the period 1978-2012. Notwithstanding concerns that trade openness through RTAs can heighten exposure to shocks, in particular when it leads to increased product specialization, RTAs through enhanced policy credibility, improved policy coordination, and reduced risk of conflicts can ease growth volatility. Empirical estimations suggest the benefits outweigh the costs as RTAs are consistently associated with lower growth volatility, after controlling for trade openness and other determinants of growth volatility. Furthermore, regression results also suggest that countries that are more prone to shocks are more likely to join a RTA, in particular with countries with relatively less volatile growth, additionally enhancing the stabilization effect.

JEL-codes: F13 F15 F43 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-int
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Related works:
Journal Article: Does a Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation (2016) Downloads
Working Paper: Does A Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation (2015) Downloads
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