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The Role of Multilateralism of the WTO in International Trade Stability

Published online by Cambridge University Press:  06 April 2021

Abdur Chowdhury
Department of Economics, Marquette University, 606 N. 13th St., Milwaukee, WI 53233, USA
Xuepeng Liu
Department of Economics & Finance, Kennesaw State University, Kennesaw, GA 30144, USA
Miao Wang
Department of Economics, Marquette University, 606 N. 13th St., Milwaukee, WI 53233, USA
M. C. S. Wong
Hobby School of Public Affairs, University of Houston, 3623 Cullen Boulevard, Room 306, Houston, TX 77204, USA
E-mail address:


We look at the effect of the WTO on stabilizing international trade using both a fixed-effects and an event study approach. Our results show that WTO members experience lower trade volatilties in a predictable and integrated system. In addition, we focus on the trade volatility comovement among countries in a multilateral framework. Previous research has mainly focused on WTO membership in a bilateral trade framework, which only allows interactions between two trade partners without considering any possible influence from other countries. A bilateral trade framework does not fully capture the effect of WTO membership, nor does it investigate why the multilateral platform of the WTO should exist. With a unique setup estimating interactions among multiple trading dyads, we find strong evidence supporting positive correlation or comovement of trade volatilities across trading pairs. Such a comovement appears much stronger among WTO members than between WTO and non-WTO members. Due to the feedback mechanism among dyads in a multilateral framework, such as the WTO, bilateral trade stability may further stabilize the global trade. Our results remain robust to a battery of sensitivity checks.

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Copyright © The Author(s), 2021. Published by Cambridge University Press

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Chowdhury et al. supplementary material


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