Academic journal article International Advances in Economic Research

Some Estimates for the Effect of Removing Import Tariffs

Academic journal article International Advances in Economic Research

Some Estimates for the Effect of Removing Import Tariffs

Article excerpt

On April 19, 2005, the countries of Thailand and New Zealand (NZ) signed a Closer Economic Partnership Agreement that was to have eliminate most tariffs on Thailand's agricultural imports. This research found that the agreement had the effect of increasing the imports and some estimates are provided for the effect.

The data consisted of 32 quarterly observations of import volume for between the years of 2000 and 2007. For the agreement itself, a dummy variable of zero was coded as one beginning from the third quarter of year 2005, which was when the agreement came into effect. To correct for reverse-causality between the imports and Thailand's gross domestic product (GDP), GDP was instrumented by a variable for the Baht exchange rate.

From using indirect least squares, regression estimates showed that the agreement increased quarterly volume by 2.6 million metric tons, an amount equivalent to nearly a tenth of the average of the total imported. Furthermore, the estimated effects upon the imports of GDP and of the relative prices of domestic agricultural products were correct in sign, these effects having been positive rather than negative.

While checking for spuriousness in the regression, unit roots could not be rejected for GDP and for the relative prices. Hence, a Dickey-Fuller test was conducted of the residuals for a variety of regressions with imports as the dependent variable. …

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