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Most Downloaded Articles
- How Islamic are Islamic Countries? by Rehman, Scheherazade S. and Askari, Hossein
- Openness to Import and Productivity by de Boyrie, Maria E. and Kreinin, Mordechai
- The Impact of Basel III on Emerging Economies by Abdel-Baki, Monal A.
- Global Economy Quarterly, Issue 4 by Carbaugh, Robert/ Olienyk, John/ Pauwels, W./ Weverbergh, M./ Alves, Rui Enrique/ Vaghefi, M. Reza/ DaPrile, Michael M./ Lynch, Allen and Woods, Louis
- Impact of Globalization on Income Distribution Inequality in 60 Countries by Zhou, Lei/ Biswas, Basudeb/ Bowles, Tyler and Saunders, Peter J
Regionalism as a Building Block for Multilateralism
Citation Information: Global Economy Journal. Volume 11, Issue 1, ISSN (Online) 1524-5861, DOI: 10.2202/1524-5861.1676, March 2011
- Published Online:
The well-known question whether regional trade agreements (RTAs) and the multilateral trading system (MTS) are strangers, friends, or foes (Bhagwati and Panagariya, 1996) has gained new importance with the widespread proliferation of RTAs in recent years. Based on an extensive data set which covers most of world trade over the past 60 years and about 240 regional trade agreements, we analyze the relationship between RTAs and the MTS by combining the gravity model framework with vector auto-regression analysis. Impulse-response-functions robustly suggest that multilateral trade liberalization responds in a significantly positive way to regional trade liberalization. We also find robust evidence that RTA liberalization Granger-causes GATT/WTO liberalization. Thus, our results indicate that RTAs do not undermine the MTS but serve as building blocks to multilateral trade liberalization.