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The effect of regional trade agreements on growth volatility
Date: 
Monday, May 8, 2017

The debate over regional trade agreements is ongoing. It has been argued that they can heighten exposure to shocks as they lead to more specialisation, and conversely that they can alleviate volatility by improving policy coordination within the anchors of a formal trade contract. This column suggests that the benefits from lowering long-term growth volatility tend to dominate potential costs, with the magnitude of this effect depending on the depth of the regional integration and the development stage of trade partners.