DETERMINANTS OF REGIONAL TRADE AGREEMENTS: GLOBAL EVIDENCE BASED ON GRAVITY MODELS
DETERMINANTS OF REGIONAL TRADE AGREEMENTS: GLOBAL EVIDENCE BASED ON GRAVITY MODELS

Summary/Abstract: There has been a continuous increase in the number of regional trade agreements (RTAs) worldwide during the previous decades. However, the analysis of determinants of regional trade agreements is somehow neglected in empirical literature. This paper aims to analyse the determinants of regional trade agreements by using gravity variables on a global sample. The results suggest that colonial variables are ambiguously related to RTAs, thereby making it hard to exactly define the role of colonial relations in the formulation of RTAs. Language is found to be negatively related to RTAs, meaning that countries speaking different languages tend to create more trade. The relationship between distance and RTAs is found to be relatively straightforward with higher distance and countries without common borders suggesting less regional trade relations. Finally, geographical indication does not seem to play a major role in creating regional trade agreements. As a practical result, it was found that gravity models are applicable for analysing the determinants of RTAs. Our results might be of interest to researchers and policymakers interested in the creation of RTAs.

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