Economics Working Papers
 

Document Type

Working Paper

Publication Date

4-2014

Abstract

Using bilateral trade data for 210 countries over the period 1948-2003, this paper attempts to shed some light on the relationship between WTO and members’ trade volatilities. We show that the trade among WTO members tends to be more stable than the trade outside the WTO, and there is strong evidence of interdependence of trade volatilities. The results show comovement of trade volatilities across all dyads in general, and much stronger comovement among WTO members than between WTO and non-WTO members. Such strong comovement implies that WTO member countries not only share the benefits of having an interdependent and more predictable trade system, but also share the risks of contagious world trade collapse as evidenced by the 2008 global financial crisis. In addition, we find that larger economies and countries covered by other types of integration agreements can do better in coping with such type of contagion.

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