Trade Blocks and the Gravity Model: A Study of Economic Integration among Asian Developing Countries

Abstract

This paper analyzes the trade creation and trade diversion effects of the regional trade agreements (RTAs) in Asia and their effects on intra-regional trade flows using annual trade data for the period 1980-2009. The research will attempt to achieve the following objectives: (a) analyze the major RTAs in Asia and their effects on intra-regional trade flows. (b) use a gravity model to estimate the trade creation and trade diversion effects of various RTAs on trade flows within and across member groups; and (c) measure the effect of RTAs on members' trade with other Asian countries. The findings of this study are, for the most part, consistent with findings of previous studies on the Asian trade flows. The coefficients of real GDP, population, and distance had expected signs and magnitudes in all models estimated.