In 2005 all ECB publications will feature a motif taken from the €50 banknote. This paper can be downloaded without charge from

this paper, we are primarily concerned with the effects of IPRs on international trade flows. In a different paper (Primo Braga and Fink 1997), we discuss how tighter IPRs affect economic welfare through FDI, the transfer of technology, and domestic R&D. The following paragraphs give a brief summary of the associated static and dynamic costs and benefits for two trading economies that may arise only in response to changes in trade flows fostered by stronger IPRs. From a static, partial-equilibrium point of view, the source country of the trade flow is likely to gain from tighter protection, because it can capture increased monopoly profits from the sale of its goods abroad. In contrast, the static effects on the welfare of the destination country are likely to be negative: increased market power by foreign title holders leading to deadweight losses.

We apply a gravity model to 1980-1996 annual non-fuel imports data for 58 countries to quantify the effects of recently created or revamped PTAs on trade. We modify the gravity equation to identify separate effects of PTAs on intra-bloc trade, members ’ total imports and their total exports and to test for significant changes in trade patterns following the creation of trade blocs. We find no indication that ‘new regionalism boosted intra-bloc trade significantly and we find trade diversion only for EU and EFTA. The latter also exhibit 'export diversion', which could indicate their imposing welfare costs on other countries. Latin American trade liberalization in the 1990s had a positive impact on bloc members ’ imports and, usually, exports.

international economics. His research on macroeconomics and international trade has

Abstract not found

For 40 years, the gravity equation has been a workhorse for cross-country empirical analyses of international trade flows and – in particular – the effects of free trade agreements (FTAs) on trade flows. However, the gravity equation is subject to the same econometric critique as cross-industry studies of U.S. tariff and nontariff barriers and U.S. multilateral imports: trade policy is not exogenous. The potential endogeneity of FTA binary right-hand-side variables motivates developing a theory of FTA determination compatible with the theory of international trade flows. Allowing econometrically for the potential FTA variable’s endogeneity yields striking empirical results: the effect of FTAs on trade flows is quintupled.

For the first time, the effects of regional trading preferences on members and on the rest of the world are investigated by examining their effects on the prices at which trade occurs. The case studies how Spanish accession to the European Community affected the prices of imports from the

Trade theories covering Preferential Trade Agreements (PTAs) are as diverse as the literature in search of their empirical support. To account for the model uncertainty that surrounds the validity of the competing PTA theories, we introduce Bayesian Model Averaging (BMA) to the PTA literature. BMA minimizes the sum of Type I and Type II error, the mean squared error, and generates predictive distributions with optimal predictive performance. Once model uncertainty is addressed as part of the empirical strategy, we report clear evidence of Trade Creation, Trade Diversion, and Open Bloc effects. After controlling for natural trading partner effects, Trade Creation is weaker – except for the EU. To calculate the actual effects of PTAs on trade flows we show that the analysis must be comprehensive: it must control for Trade Creation and Diversion as well as all possible PTAs. Several prominent control variables are also shown to be robustly related to Trade Creation; they relate to factor endowments and economic policy.

Erudite, Universite de Paris XII, France. Gravity type models have often been used to analyse trade flows between countries and trading blocs. Previously however, these models were only applied to either cross-section data, or to single country time-series data, which imposed severe explicit (or implicit) restrictions on the specification of the model. Recently Gravity models have been generalised and adapted to a panel data setting, where several time-series of cross-section data sets were pooled. This approach not only increases the degrees of freedom, it also enables the proper specification of source and target country effects and time (or business cycle) effects. In this paper, we review in a unified framework, the recent developments in the econometric methodology of Gravity models, and refine the estimation techniques to account for any possible simultaneity bias. Although a fully specified fixed effects Gravity model has been estimated previously, this paper contains the first ever results of its random effects counterpart. We also suggest an extension to the basic model, which accounts for the fact that contemporaneous trade flows are likely to be strongly related to previous ones. Once more, this appears to be the first application of such a model in the literature. Finally, all of these various models and methods are illustrated with an application to export flows in the APEC region. The results clearly suggest that it is important to properly specify the model, in terms of source, target and business cycle effects. If this is not the case,

Recent econometric estimates suggest that currency unions have far greater effects on trade patterns than previously believed. Since currency unions are good for trade, and trade is good for growth, that is one major argument in favor of EMU. If there were evidence that the boost to trade within EMU was likely to come in part at the expense of trade with outsiders, that would imply something stronger, for a neighbor such as the United Kingdom: that life outside EMU would get progressively less attractive in the future. But there is no such evidence, either for currency unions in general (according to Frankel-Rose) or for the first three years of EMU in particular (according to Micco, Stein, and Ordoñez). Furthermore, there are the usual countervailing arguments for retaining monetary independence, particularly the famous asymmetric shocks. One possible argument for waiting is that UK trade with euroland is still increasing, probably due to lagged effects of joining the EU and the Single Market initiative. Estimates suggest that the growing trade links in turn lead to growing cyclical correlation. The implication is that the UK may better qualify for the optimum currency area