Working Paper: NBER ID: w17003
Authors: James E. Anderson; Yoto V. Yotov
Abstract: This paper infers the terms of trade effects of Free Trade Agreements (FTA's) with the structural gravity model. Using panel data methods to resolve two way causality between trade and FTA's, we estimate direct FTA effects on bilateral trade volume in 2 digit manufacturing goods from 1990-2002. We deduce the terms of trade changes implied by these volume effects for 40 countries plus a rest-of-the-world aggregate. Some gain over 10%, some lose less than 0.2%. Overall, using a novel measure of the change in iceberg melting, global efficiency rises 0.62%.
Keywords: Free Trade Agreements; Terms of Trade; Global Efficiency; Structural Gravity Model
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FTAs (F15) | bilateral trade volumes (F10) |
| bilateral trade volumes (F10) | terms of trade changes (F14) |
| FTAs (F15) | global efficiency (D61) |