Graduation Year

2016

Date of Submission

4-2016

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Ricardo Fernholz

Reader 2

Sven Arndt

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2016 Justin A Beck

Abstract

The North American Free Trade Agreement continues to be a controversial topic, and with the impending implementation of the Trans-Pacific Partnership trade agreement, NAFTA has been a heavily discussed issue during the 2016 presidential campaign. Past research has critically assessed the extent to which NAFTA delivered on promises made by its lobbyists to improve economic welfare and stimulate growth in the North American markets, via trade and investment. These studies explain that NAFTA has helped to boost intra-regional trade and investment flows in North America, but has fallen short on any substantial improvements in welfare and deeper regional economic integration. However, researchers have found evidence for convergence among North American equity markets, and argue that this is generated by NAFTA. Using time series data from 1990 to 2007, this study builds on these conclusions to examine how NAFTA impacted equity markets in the North American region. I look at returns to each major stock index for Mexico, the U.S. and Canada, and find evidence that returns on these indexes improve in the post-NAFTA period for Mexico and the U.S., but not for Canada. Additionally, there is evidence to suggest that exports and FDI are the primary drivers for this improvement in stock returns.

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