AMU and the cushion effect
Sammanfattning: This paper focuses on the relationship between PTAs and political uncertainty. Further, it analyses if the AMU has managed to create a dampening effect and thereby maintain the intratrade flows during the Arab Spring. This can be interpreted as the cushion effect. Previous literature has not addressed this unique approach. This could be due to the belief of AMU being an inefficient trade agreement or its rather few members gaining a small share of the world’s attention. The data observed consisted of bilateral trade flows from 2005-2015. Our specification uses a dummy variable to capture the Arab Spring between 2011-2012. The political unrest was further investigated with the help of the gravity model by comparing two groups, a focus group (AMU) and a control group, including other MENA-countries. The paper concluded that although the AMU seemed to have its flaws, it still managed to partly create a cushion effect. According to our regressions, the large countries within the trade agreement increased their intra-trade during the uncertainty. The Arab Spring had a different effect on small member states, their intra-trade decreased during the same period. The paper managed to highlight the importance of well-functioning PTAs during times of uncertainty.
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