The Greater Arab Free Trade Area(GAFTA): an Estimation of Its Trade Effects

Abedini, Javad; Péridy, Nicolas

doi:2008.23.4.848

Journal of Economic Integration 2008 December;23(4) :848-872.
DOI: https://doi.org/10.11130/jei.2008.23.4.848

The Greater Arab Free Trade Area(GAFTA): an Estimation of Its Trade Effects

Javad Abedini, Nicolas Péridy

Université du Nantes
Université du Sud Toulon-Var(LEAD)

ABSTRACT

In 1997, fourteen Arab countries concluded an agreement, aimed at achieving the Greater Arab Free Trade Area (GAFTA) by 1.1.2007 at the latest. This paper provides a first ex-post appraisal of the GAFTA agreement's trade effects. Based on new theoretical developments of the gravity equation, we estimate a panel data model which covers trade within the GAFTA area as well as with 35 other reference countries, over the period 1988-2005. Several estimators are presented, especially transformed fixed-effects, Hausman and Taylor as well as a GMM dynamic estimator. As a main finding, the calculation of gross trade creation shows that regional trade has increased by 20% since GAFTA has been implemented.

• JEL Classification: F 15

Keywords: regional economic integration | GAFTA | gravity

REFERENCE

1.	Abedini J. (2005), "The Gravity Model and Sunk Costs", 7^th ETSG Conference, Dublin, September.

2.	Abedini J. (2006), "An Investigation of the Role of Expectations in Trade: The Case of the Gravity Model", 8^th ETSG Conference, Vienna (Austria), September.