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Journal of Economic Integration 2008 December;23(4) :848-872.
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)
Copyright ©2008 Journal of Economic Integration

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
1. Abedini J. (2005), "The Gravity Model and Sunk Costs", 7th ETSG Conference, Dublin, September.
2. Abedini J. (2006), "An Investigation of the Role of Expectations in Trade: The Case of the Gravity Model", 8th ETSG Conference, Vienna (Austria), September.
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