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Politics, Governance and Overlapping RTAs in Disruptive Era
Dyah Titis Kusuma Wardani*, Aliza Harry Tanthowy

Department of Development Economics, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta, Indonesia 55183

*dyahtitis.wardani[at]gmail.com


Abstract

This paper analyzes the effect of Free Trade and Regional Trade Agreement, openness, democracy and governance of Indonesia and Turkey bilateral trade toward OIC countries in disruptive era. The Gravity model is used to analyze the effect of FTA and RTA on trade flows. Instead of standard gravity model that use three basic variables such as RGDP reporter, RGDP partners and distance. We use extended gravity model equation by add more variables such as population as country-s characteristic also exchange rate and inflation as macroeconomics variables. In this Gravity model, this research employs economic factors such as RTA and openness. Moreover, we use political factors such as democracy and governance (e.g., political stability) to enforce the political economy analysis of international trade. Dependent variable of this gravity model is total value of export ($US). Data of trade flow of export from Indonesia and Turkey toward OIC countries is obtained from UN-COMTRADE using Standard International Trade Classification (SITC) Rev.2-3 digits. Employing random effect, Maximum Likelihood Estimation (MLE) and Poisson Pseudo Maximum Likelihood (PPML), results show that this model robust for every estimation. Result also show that, some FTAs and RTAs of Indonesia and Turkey are ineffective due to overlapping. Turkey also has the same situation, since Turkey also has FTA and RTA with other economic community outside the OIC countries.

Keywords: Regional Trade Agreement (RTA); Panel data; Gravity model

Topic: International Conference of Islamic Economic and Financial Inclusion

Link: https://ifory.id/abstract/6rRnTycqDBYu

Conference: The 3rd International Conference on Sustainability and Innovation (ICoSI 2019)

Plain Format | Corresponding Author (Saykha Sabila Araz)

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