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Journal of Economic Integration 2010 December;25(4) :627-643.
Trade Blocks and the Gravity Model: A Study of Economic Integration among Asian Developing Countries

E. M. Ekanayake Amit Mukherjee Bala Veeramacheneni 

Bethune-Cookman University
The Richard Stockton College of New Jersey
Farmingdale State College
Copyright ©2010 Journal of Economic Integration

This paper analyzes the trade creation and trade diversion effects of the regional trade agreements (RTAs) in Asia and their effects on intra-regional trade flows using annual trade data for the period 1980-2009. The research will attempt to achieve the following objectives: (a) analyze the major RTAs in Asia and their effects on intra-regional trade flows. (b) use a gravity model to estimate the trade creation and trade diversion effects of various RTAs on trade flows within and across member groups; and (c) measure the effect of RTAs on members' trade with other Asian countries. The findings of this study are, for the most part, consistent with findings of previous studies on the Asian trade flows. The coefficients of real GDP, population, and distance had expected signs and magnitudes in all models estimated.

JEL Classification: F14 and F15

Keywords: Trade Blocks | Gravity Model | Intra-Regional Trade | Asia
1. Anderson, J. E., van Wincoop, E. (2003), Gravity with Gravitas: A Solution to the Border Puzzle, American Economic Review, 93(1), pp. 170-192.
2. Anderson, J. E. (1979), A Theoretical Foundation for the Gravity Equation, American Economic Review, 69(1), pp. 106-116.
3. Athukorala, P., Yamashita, N. (2006), Production fragmentation and trade integration: East Asia in a Global Context, North American Journal of Economics and Finance, 17, pp. 233-256.
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