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The Journal of Economic Integration 2024 September;39(3) :590-621.
DOI: https://doi.org/10.11130/jei.2024019
Assessing the Association Between Trade and Regional Trade Agreements: A Network Approach

M Rahul1 Deepika Srivastava2

1Institute of Economic Growth, New Delhi, Delhi, India
2Indian Economic Service, New Delhi, Delhi, India
Corresponding Author: M Rahul ,Email: rahulmeco@gmail.com
Copyright ©2024 The Journal of Economic Integration
ABSTRACT
Over the years, the global economy has become increasingly integrated due to globalisation, resulting in an increase in international trade flows and a complex network of trade links. The establishment of regional trade agreements (RTAs) has created an intricate network of connections and overlapping agreements among multiple members. The study traces the evolution of trade and RTA networks using tools of network analysis for the periods 1995-2021. We find that the importance of countries in the trade network has changed, with developing countries replacing the previously dominant players. China, in particular, has emerged as a key player during this period. We find that connectivity in the trade network is n ot s trongly associated w ith t he RTA network. We a lso identify t hree m ajor c ommunities w ithin t he trade network, with the United States, Germany, and Japan (later China) as the core countries in these communities. Furthermore, we compare the community structures of the trade network and the RTA network using Normalised Mutual Information. Our analysis suggests that the community structure of trade has limited overlap with the community structure of RTAs. Furthermore, correlations based on the quadratic assignment procedure indicate a weak association, if any, between the two networks over the years.

JEL Classification
F10: General
F13: Trade Policy; International Trade Organizations
F14: Empirical Studies of Trade
F15: Economic Integration
Keywords: international trade | regional integration | free trade areas | network analysis | Quadratic Assignment Procedure | Normalised Mutual Information
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