Volume 29, Issue 5, 2020


DOI: 10.24205/03276716.2020.1016

Impacts of Free Trade Policies on Dependency of Trades with Copula Approach


Abstract
The trades between China and Taiwan across the Taiwan Strait has been growing continuously. The Chinese government implements a series of free trade policies which have impacts on the cross-strait’s trade integration and economic growth. Fujian Province as one of the communication windows with Taiwan has implemented a series of free trade polices accomplishes with the policies of Chinese central government. This study emphasizes on the investigation of the impacts of free trade policy on dependency of trades across the Taiwan Strait. With the application of copula approach, this study analyzes the situation of imports and exports between Fujian and Taiwan under the free trade policies. The results reveal that under the free trade policies, the dependency of trades has been affected. After the establishment of China (Fujian) Pilot Free Trade Zone, the trade dependency of Fujian and Taiwan using static copula is extremely highly dependent. The dynamic copula is also used to capture the dynamic dependency of trades. The results suggest that the establishment of free trade zone strengthens the trade cooperation between Fujian and Taiwan. The results may provide helpful insights for the policy makers and international investors

Keywords
copula, free trade policy, dependency of trades, free trade zone, trade cooperation

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