Economic Gains of Regional Agreements: Deeper versus Wider Integration
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Table 11.A.14 Fixed-Effects Panel Estimates of (Log) Real Export Value on RTA Market Dependent Variable: Log export value (constant 2000 US$) Initial per-capita Real GDP FDI inflows to GDP Exchange rate risk Inflation Investment climate index Absolute RTA R2 (within) Number of observations/groups
0.813 (0.09)*** 0.014 (0.01)** 0.042 (0.01)*** 0.000 (0.00)* 0.022 (0.01)** 0.004 (0.00)*** 0.77 387/112
Source: Authors. Note: Standards errors are shown in parentheses. *** Significant at the 1% level; ** significant at the 5% level; * significant at the 10% level.
A more promising scenario considers the formation of a Maghreb union and its entrance into an RTA with the United States or the European Union. This would generate additional per capita growth for members of the Maghreb Union of almost 1.0 percentage point for an agreement with the United States and 0.7 percentage point for an arrangement with the European Union.
Notes 1. Investment climate reforms refer to reforms that aim at enhancing market contestability and openness (such as privatization, liberalization, competition). Because of data limitations, the impact of labor mobility is not assessed in this analysis. 2. Typically, CGE models are used to evaluate the trade effects of an RTA. These models combine standard microeconomic assumptions with data from a single period to simulate the response to policy changes of an entire economy or group of economies. CGE models have a weaker empirical foundation than models used for macroeconomic forecasting, because their equations are not estimated empirically from time series data. However, CGE models are able to account for more complex general equilibrium interactions among a larger number of sectors and markets than econometric models can. The results from the CGE models should be read with caution, given the range of estimates, varying their assumptions about elasticities of response and mobility factors that affect the model calibration. 3. For a more detailed discussion of the model, including the data source, see Jaumotte (2004).