FTA and Economic Growth: A Nonparametric Approach

Jung Hur and Cheolbeom Park

No 1009, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: This paper assesses whether a bilateral FTA exerts a positive growth effect of the economies of the two countries engaging in the FTA. It employs a nonparametric matching approach, which is more faithful to questions posed by trade theories, imposes no specific functional froms on the relation, and can be applied to a broad range of data structures. Unlike the results from earlier linear regression model approaches, we find an insignificant effect of the FTA on total economic growth. In particular, we demonstrate that an FTA exerts no significant growth effects in the one-to-10-year period after its launch. Furthermore, we detect an upward trend in the gap between the growth rates of per capita real GDP within a bilateral FTA. This implies uneven FTA effects across within an FTA, which may explain, in part, the insignificant effects of the FTA on the total economic growth.

Keywords: Free trade agreement; Growth; Matching; Treatment effect (search for similar items in EconPapers)
JEL-codes: C14 C21 F13 O24 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:iek:wpaper:1009

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