The Effect of Free Trade Agreements on Bilateral Trade Flows: The Case of

Abstract: The purpose of this paper is to argue that free trade agreements do not necessarily improve trade between member countries. The effects of such agreements depend on the historical, political and ethnic circumstances in trading partner countries and the specifi cs of their relations. The sample consists of panel data, which includes CEFTA member countries and their major trading partners for the period 1999-2007. Results of the gravity model suggest that trade liberalisation did not improve trade in the region for the observed period, when controlling for the other trade determinants. This fi nding may be a result of recent confl icts between the observed countries of the region