The Effects of Mercosur on Trade : An Analysis Based on a Gravity Model (O Efeito Do Mercosul Sobre O Comercio: Uma Analise Com O Modelo Gravitacional)

This paper examines the effects on trade flows that can be attributed exclusively to Mercosur formation and separates these from other factors influencing trade based on a gravity model. The analysis is based on a large sample of data pooled over the period 1987-1998, which allows one to determine the effect of the bloc during each phase of its integration process and to test for the presence of structural break in parameters associated with Mercosur. The main conclusion from this paper is that the liberalization on a MFN basis significantly affected Mercosur overall imports and exports, while the bloc formation has not contributed to change intrabloc trade beyond the nondiscriminatory liberalization. The results deny the expectations that the surge in value of intrabloc trade during the 1990s would have stemmed from intrabloc trade liberalization. In contrast, they show that after controlling for the gravity model variables there is no soaring intrabloc trade left to be explained by the regional integration