{
  "title": "Performance of Western Hemisphere Trading Blocs: A Cost-Corrected Gravity Approach",
  "publication": "IMF Working Papers, June 1, 2004",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/performance-of-western-hemisphere-trading-blocs-a-cost-corrected-gravity-approach-17425",
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  "summary": "We study the performance of the four Western Hemisphere trading blocs during the period 1978-2001. For the North American Free Trade Agreement (NAFTA), trade integration outweighed trade diversion; for MERCOSUR, increased integration and trade diversion went hand in hand; for the Central American Co",
  "sections": [
    {
      "heading": "Key findings",
      "content": "- Study period: 1978-2001.\n- For the North American Free Trade Agreement (NAFTA), \"trade integration outweighed trade diversion.\"\n- For MERCOSUR, \"increased integration and trade diversion went hand in hand.\"\n- For the Central American Common Market (CACM) and the Andean Community, the evidence points to \"trade diversion only.\"\n- Trade among neighboring countries has increased since the early 1990s.\n- The estimations are based on a nonlinear gravity equation that incorporates the hypothesis that \"exports create externalities that affect trade costs.\"\n- The exports-externalities hypothesis \"might help reconcile the theoretical unitary income elasticity with most empirical findings of a non-unitary income elasticity in studies using the gravity equation.\""
    },
    {
      "heading": "Methodology and analytical approach",
      "content": "- Empirical framework: nonlinear gravity equation.\n- Novel hypothesis incorporated: exports create externalities that affect trade costs.\n- The approach is designed to address the discrepancy between theoretical unitary income elasticity and empirical non-unitary income elasticity findings in gravity-equation studies."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Econometric analysis, Economic integration, Exports, Gravity models, Imports, International trade, Trade agreements, Trade integration.\n- Keywords: bloc's propensity, Exports, externalities, Global, Gravity models, Imports, Mercosur country, trade, Trade agreements, trade cost factor, trade diversion, trade financing constraint, Trade integration, trade integration and trade diversion, trade resistance, Trading blocs, Western Hemisphere, WP.\n\n---\n\n Content in this bundle\n\n- wp04109\n  - wp04109 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp04109 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/performance-of-western-hemisphere-trading-blocs-a-cost-corrected-gravity-approach-17425"
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    "[Markdown version](/en/publications/wp/issues/2016/12/30/performance-of-western-hemisphere-trading-blocs-a-cost-corrected-gravity-approach-17425/index.md)",
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    "Authors: Enzo Croce, V. Hugo Juan-Ramon, Feng Zhu",
    "Published: June 1, 2004",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451853247.001",
    "Study period: 1978-2001.",
    "For the North American Free Trade Agreement (NAFTA), \"trade integration outweighed trade diversion.\"",
    "For MERCOSUR, \"increased integration and trade diversion went hand in hand.\"",
    "For the Central American Common Market (CACM) and the Andean Community, the evidence points to \"trade diversion only.\"",
    "Trade among neighboring countries has increased since the early 1990s.",
    "The estimations are based on a nonlinear gravity equation that incorporates the hypothesis that \"exports create externalities that affect trade costs.\"",
    "The exports-externalities hypothesis \"might help reconcile the theoretical unitary income elasticity with most empirical findings of a non-unitary income elasticity in studies using the gravity equation.\"",
    "Empirical framework: nonlinear gravity equation.",
    "Novel hypothesis incorporated: exports create externalities that affect trade costs.",
    "The approach is designed to address the discrepancy between theoretical unitary income elasticity and empirical non-unitary income elasticity findings in gravity-equation studies.",
    "Subject: Econometric analysis, Economic integration, Exports, Gravity models, Imports, International trade, Trade agreements, Trade integration.",
    "Keywords: bloc's propensity, Exports, externalities, Global, Gravity models, Imports, Mercosur country, trade, Trade agreements, trade cost factor, trade diversion, trade financing constraint, Trade integration, trade integration and trade diversion, trade resistance, Trading blocs, Western Hemisphere, WP.",
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