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Baltagi article on regional trade agreement effects published in Journal of Econometrics

Jun 30, 2008

Estimating Regional Trade Agreement Effects on FDI in an Interdependent World

Badi H.Baltagi, PeterEgger & Michael Pfaffermayr

Journal of Econometrics, June 2008

Badi H. Baltagi

Badi H. Baltagi


Recent research on trade and multinationals highlights that multinational firms’ integration strategies are complex and the degree of vertical integration varies in a multilateral world with many possible locations of activity. In particular, multinationals control a large fraction of trade within the block of developed countries. The most important regional trade agreements (RTAs) are signed between members of the very same block of economies. This gives rise to the question asked in the present paper: what is the impact of RTAs on FDI in an interdependent world? Recent spatial HAC estimation techniques are applied to both estimation and testing.