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FREE TRADE AREAS AND INTRA-REGIONAL TRADE: THE CASE OF ASEAN

Tinbergen Institute & Amsterdam School of Economics, Universiteit van Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands

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FRANC J. G. M. KLAASSEN

Tinbergen Institute & Amsterdam School of Economics, Universiteit van Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands

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, and

G. K. RANDOLPH TAN

Division of Economics, School of Humanities & Social Sciences, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore

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https://doi.org/10.1142/S0217590809003367Cited by:3 (Source: Crossref)

Abstract

We study the effects of free trade areas on bilateral trade flows. We review and extend the previous empirical literature by embarking on the modelling of unobserved heterogeneity. We apply our preferred model to the case of the Asean Free Trade Area (AFTA). The estimation results suggest that there has been a positive effect of AFTA. This empirical finding is contrary to earlier estimation results, which are typically not so positive about AFTA. It is our impression that these earlier estimates on AFTA are confounded with the effects of unobserved determinants of trade.

Keywords:

JEL: C23, F15

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