Measuring the Effects of RPAs on Trade Creation and Economic Growth

This chapter addresses the problem of measuring the impact of payments unions and clearing facilities on the intra-regional and extra-regional trade of participating countries, and the consequences of such trade effects for regional economic growth in the medium term. In Section 7.1 we examine the difficulties inherent in this empirical project, and sketch the general approach adopted in our case studies. In Section 7.2 we review the empirical literature on the impact of economic integration on trade, to understand the methodological choices which any such study must confront. In Section 7.3 we explain the method of measuring the impact of an economic integration program, developed by Balassa (1967), which we adapt as a benchmark method of estimating trade creation effects in the case studies. Finally, in Section 7.4 we discuss the difficulties of assessing the dynamic impact of payments unions — given the unsettled state of growth theory — and propose a method for estimating the medium-term growth effects of RPAs on the economies of member countries. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.