THE ECONOMIC GROWTH EFFECTS OF THE EUROMED FTA

Abstract

 This paper analyzes the economic growth effect of Euro-Mediterranean Free Trade Agreement on European Union and Middle East and North Africa countries with using panel cointegration analysis for the period 1996-2011. In the first step, heterogeneity and cross-section dependence among countries were tested and found that all series have cross-section dependence. For that reason, second generation panel unit root and panel cointegration tests were used. This paper also gives country-specific results at the long-run model via using Common Correlated Effect Model. This contribution provides crucial information about the European Union countries and Middle East and North Africa countries.

References

1.  Balassa, B. A. (1961), The Theory of Economic Integration, Richard D. Irwin Inc. Homewood,Illinois. 
2. Baldwin, R. E. (1989), The Growth Effect of 1992, Economic Policy: a European Forum, Vol. 9, pp.247-281. 
3. Baldwin, R.E. and Seghezza E. (1996), Testing for Trade-Induced Investment-Led
4. Growth, NBER Working Paper Series, 5416. 
5. Barro, R. J. and Sala-i-Martin, X. (1995), Economic Growth, United States of Amerika: McGraw Hill. 
6. Bhagwati, J. and Srinivasan, T. N. (2002), Trade and Poverty in the Poor Countries,
7. The American Economic Review, Vol. 92, No. 2, pp.180-183.  Borota, T. and Kutan, A. M. (2008), Regional Integration and Economic Growth:
8. The Case of the European Union, The Journal of International Trade and Diplomacy 2, Vol. 1, pp.93-113.  Brada, J. C. and Mendez, J. A. (1988), An Estimate of the Dynamic Effects of

9. Economic Integration. The Review of Economics and Statistics, Vol. 70, No. 1, pp.163-168.  Dolar, D. (1992), Outward-oriented Developing Countries Really Do Growth More
10. Rapidly: Evidence from 95 LDCs 1976-1985, Economic Development and Cultural Change, Vol. 39, No. 1, pp.523-544.
11. Edwards, S. (1992), Trade Orientation, Distortions, and Growth in Developing
12. Countries, Journal of Development Economics, Vol. 39, No. 1, pp.31-57. Fölster S. and Henrekson M. (2001), Growth Effect of Government Expenditure and Taxation in Rich Countries, European Economic Review, Vol. 45, pp.1501- 15 
13. Frankel, J. A. and Romer, D. (1999), Does Trade Cause Growth?, American
14. Economic Review, Vol. 89, pp.379-399.  Ghatak, S. and Wheatley Price, S. (1996), Export Composition and Economic
15. Growth: Cointegration and Causality Analysis Evidence for India, Review of World Economics, Vol. 133, No. 3, pp.538-52. Grossman, G.N. and Helpman, E. (1995), Technology and Trade, Centre for
16. Economic Policy Research (CEPR) Discussion Papers, Vol. 1134, pp.1-73.
17. Henrekson, M, Torstensson, J. and Torstensson, R. (1997), Growth Effects of
18. European Integration, European Economic Review, Vol. 41, pp.1537-1557.
19. Levine, R. and Renelt, D. (1992), A Sensitivity Analysis of Cross-Country Growth
20. Regressions, The American Economic Review, Vol. 82 No. 4, pp.942-963.  Lipsey, R. G. and Lancester, K. (1956-1957), The General Theory of Second Best,
21. Review of Economic Studies, Vol. 24, No. 1, pp.11-32.  Nguyen, T. D. and Ezaki, M. (2005), Regional Economic Integration and its Impacts on Growth,
22. Applied Regional Science Conference (ARSC), Blackwell Publishing Asia Pty.Ltd. Poverty and Income Distribution: The Case of Vietnam, The  Pesaran, M. H. (2004), General Diagnostic Tests for Cross Section Dependence in Panels, IZA
23. Discussion Paper, Vol. 1240, pp.1-39. 
24. Pesaran, M. H. (2006), Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure, Econometrica, Vol. 74, No.4, pp.967-1012. 
25. Pesaran, M. H. (2007), A Simple Panel Unit Root Test in the Presence of Cross
26. Section Dependence, Journal of Applied Econometrics, Vol. 22, pp.265-312.  Pesaran, M. H. and Yamagata, T. (2008), Testing Slope Homogeneity in Large
27. Panels, Journal of Econometrics, Vol. 142, pp.50-93.  Romer, D. (1993), Openness and Inflation: Theory and Evidence, The Quarterly
28. Journal of Economics, Vol. 108, No. 4, pp.869-903. Solow, R. M. (1956), A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, Vol. 70, No.1, pp.65-94.
29. Tinbergen, J. (1965), International Economic Integration, Amsterdam: Elsevier. 
30. Vamvakidis, Athanasios (1998), Regional Integration and Economic Growth, The World Bank Economic Review, Vol. 12, No. 2, pp.251-270. 
31. Vanhoudt, P. (1999), Did the European Unification Induce Economic Growth?,
32. Review of World Economics, Vol. 135 No. 2, pp.193-220.  Wacziarg, R. (2001), Measuring the dynamic gains from trade, Policy Research
33. Working Paper Series, The World Bank, pp.1-57. Westerlund, J. (2008), Panel Cointegration Tests of the Fisher Effect. Journal of
34. Applied Econometrics, Vol. 23, pp.193-233. Willem, D. (2011), Regional Integration, Growth and Convergence, Journal of
35. Economic Integration, Vol. 26, pp.1-28. World Bank (2011), World Economic Indicators, http://databank.worldbank.org/ddp/editReport?REQUEST_
36. SOURCE=search&CNO=2&country=&series=NY.GNP.PCAP.CD&period=, (2011).