Free Trade Agreements, Trade Openness and Economic Growth: A study of Asia

The accelerated proliferation of the volume of FTAs for Asian economies has constantly intrigued the economics researchers. An anonymous conclusion is yet to be reached about the effect of FTAs on economic growth. This research investigates the affiliation amidst in-effect FTAs and trade openness on growth. A dynamic panel approach with the Arellano-Bond GMM estimators has been used for this research to tackle the endogeneity issue faced by past literatures. This research enhances the current literature by scrutinizing both bilateral and multilateral FTAs in individual models with a dummy variable approach. The inspection of the effect of FTAs on economic development of Asian LDCs in a separate model is also a contribution of this paper to existing literature. Individually, the FTAs failed to indicate statistically significant and positive impact on growth. However, when tested in the presence of trade openness they do exhibit positive statistical significance on growth. Intriguingly, trade openness exhibits a negative ramification on growth in all estimations. The FTA dummy for the Asian LDCs demonstrates a negative outcome on economical progression which can be attributed to the net importer characteristics of those countries.