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Staff Papers Logo    March 1999
Volume 46, Number 1
Regional Trade Agreements or Broad Liberalization:
Which Path Leads to Faster Growth?

By Athanasios Vamvakidis

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Abstract: Should a closed economy open its trade to all countries or limit itself to participation in regional trade agreements (RTAs)? Based on time-series evidence for a data set for 1950-92, this paper estimates and compares the growth performance of countries that liberalized broadly and that of those that joined an RTA. The comparisons show that economies grew faster after broad liberalization, in both the short and the long run, but slower after participation in an RTA. Economies also had higher investment shares after broad liberalization, but lower ones after joining an RTA. The policy implications support broad liberalization. [JEL F43]

1999 International Monetary Fund