Working Paper: CEPR ID: DP8566
Authors: Christoph Moser; Andrew K. Rose
Abstract: The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess these effects using capital market data and an event-study approach, using a daily data set covering a thousand announcements spanning over eighty economies and a hundred RTAs over twenty recent years. We measure the effects of news concerning RTAs on the returns of national stock markets, adjusted for international stock market movements. We then link these excess returns to features of the RTA members and the agreements themselves. We find 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.
Keywords: assets; data; empirical; event study; income; low; natural; panel; producers
JEL Codes: F10; F13; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Regional Trade Agreements (RTAs) (F13) | National Stock Market Returns (G17) |
| RTAs (between high trade volume countries) (F14) | National Stock Market Returns (G17) |
| Regional Trade Agreements (RTAs) (F13) | Stock Market Returns of Poorer Countries (O57) |
| Pre-existing Trade Relationships (F10) | Stock Market Returns after RTA Announcements (G17) |