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The CAFTA-DR Free Trade Agreement – Analyzing Its Effects in a Modern Gravity Framework

Principal Investigator(s): View help for Principal Investigator(s) Juan René Rojas Rodríguez; Xenia Matschke, Universität Trier

Version: View help for Version V1

Name	File Type	Size	Last Modified
CAFTA_DR			05/04/2021 12:09:PM

Project Citation:

Rojas Rodríguez, Juan René, and Matschke, Xenia. The CAFTA-DR Free Trade Agreement – Analyzing Its Effects in a Modern Gravity Framework. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2021-05-05. https://doi.org/10.3886/E139641V1

Project Description

Summary: We study the effects of the Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR), signed in 2004, on the trade flows of its member states. Relying on the structural gravity model of trade framework, we find evidence of an increase in members' bilateral trade, but also of significant differences in these effects. Increases in trade flows resulting from CAFTA-DR are strongest for the United States, but statistically insignificant for most other member states. A high level of previous integration between Central American countries and the Dominican Republic prior to CAFTA-DR could explain this outcome. Using a counterfactual analysis, we are also able to measure the general equilibrium effects of CAFTA-DR, finding that it has, in general, increased both total exports and income levels in most of the member states.

Scope of Project

Subject Terms: Gravity Model of Trade; Free Trade Agreements; International Trade

Geographic Coverage: World

Time Period(s): 2000 – 2016

Methodology

Data Source:

The data for the structural gravity model of trade are from the International Trade and Production Database for Estimation (ITPD-E), ver.01, and the Dynamic Gravity Dataset (DGD), ver.02. Both are available in the website of the United States International Trade Commission.

Scales: US$ Millions, kilometers, dummy variables

Unit(s) of Observation: country-pair

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Published Versions

V2 [2022-10-15]

V1 [2021-05-05]

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