Patterns and Determinants of Cross-border Financial Asset Holdings in East Asia
Lee, Jong-Wha | February 2008
Abstract
Overlapping free trade agreements (FTAs) have given rise to hub-and-spoke FTAs that may promote trade by giving an export advantage to the FTA hub country. We empirically investigate the effect of hub-and-spoke FTAs on trade using panel data consisting of 99 countries and covering the period 1960–1999. Our empirical analysis of the panel data yields three notable findings. First, FTAs have a significant and positive impact on trade. Second, hub-and-spoke FTAs increase trade above and beyond FTAs, and thus reinforce the trade-boosting effects of FTAs. Third, our results imply an annual growth rate of 4.9% in bilateral trade and hence a doubling of trade after 14½ years between FTA partners. Our results indicate that the hub-and-spoke nature of FTAs has a positive effect on trade, in addition to the direct, trade-liberalizing effect of FTAs. Therefore, in a world of overlapping FTAs, a more accurate empirical analysis of the relationship between FTAs and trade calls for taking into account the hub-and-spoke characteristic of FTAs.
Citation
Lee, Jong-Wha. 2008. Patterns and Determinants of Cross-border Financial Asset Holdings in East Asia. © Asian Development Bank. http://hdl.handle.net/11540/1764. License: CC BY 3.0 IGO.Keywords
Finance
Public Finance
Governance
Taxation
Public Debt
Local Government
Debt Management
Local taxation
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