DP4246 Does the WTO Make Trade More Stable?

Author(s): Andrew K Rose
Publication Date: February 2004
Keyword(s): bilateral, coefficient, data, empirical, flow, international, panel, variation, volatility
JEL(s): F13
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4246

I examine the hypothesis that membership in the World Trade Organization (WTO) and its predecessor the General Agreement on Tariffs and Trade (GATT) has increased the stability and predictability of trade flows. I use a large dataset covering annual bilateral trade flows between over 175 countries between 1950 and 1999, and estimate the effect of GATT/WTO membership on the coefficient of variation in trade computed over 25- year samples, controlling for a number of factors. I also use a comparable multilateral dataset. There is little evidence that membership in the GATT/WTO has a significant dampening effect on trade volatility.