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A Tale of Parallel Integration Processes. A Gravity Analysis of EU Trade with Mediterranean and Central and Eastern European Countries

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Author Info
Anna Ferragina () (ISSM-CNR)
Giorgia Giovannetti () (University of Florence and Italian Foreign Trade Commission)
Francesco Pastore () (Seconda Università di Napoli and IZA Bonn)

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Abstract

Despite the EU emphasis on the 1995 Barcelona process, trade integration with the Mediterranean (MED) countries is still underdeveloped. To contrast the success of EU integration with MED countries and that with the new EU members, we compute the trade potential of these EU partners from 1995 to 2002 using an “out-of-sample” methodology. The coefficients are taken from different panel estimators of the gravity equation relative to intra- EU trade. Our analysis suggests the existence of sizeable, unexploited trade potential with both groups of partners, although the ratio of potential to actual trade with the MED countries is much larger (from 1.7 to 2.5 times), more dispersed and stable compared to that with the CEECs. Moreover, the potential tends to converge to actual trade in a much longer time in the case of MED countries.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1829.

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Length: 32 pages
Date of creation: Nov 2005
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Handle: RePEc:iza:izadps:dp1829

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Related research
Keywords: MED agreements EU eastward enlargement gravity equation trade potential

Other versions of this item:

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
F15 - International Economics - - Trade - - - Economic Integration
F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
P45 - Economic Systems - - Other Economic Systems - - - International Linkages
P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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References listed on IDEAS
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  1. Greenaway, David & Milner, Chris, 2002. "Regionalism and Gravity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 574-85, December. [Downloadable!] (restricted)
  2. Brenton, Paul & Gros, Daniel, 1997. "Trade Reorientation and Recovery in Transition Economies," Oxford Review of Economic Policy, Oxford University Press, vol. 13(2), pages 65-76, Summer.
  3. Gros, Daniel & Gonciarz, Andrzej, 1996. "A note on the trade potential of Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 12(4), pages 709-721, December. [Downloadable!] (restricted)
  4. Baldwin, Richard E., 1997. "Comment on Gros and Gonciarz," European Journal of Political Economy, Elsevier, vol. 13(1), pages 187-188, February. [Downloadable!] (restricted)
  5. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May. [Downloadable!] (restricted)
  6. Hamilton, C.B. & Winters, L.A., 1992. "Opening Up International Trade in Eastern Europe," Papers 511, Stockholm - International Economic Studies.
  7. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January. [Downloadable!] (restricted)
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  8. Peter Egger, . "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO. [Downloadable!]
  9. Buch, Claudia M. & Kleinert, Jorn & Toubal, Farid, 2004. "The distance puzzle: on the interpretation of the distance coefficient in gravity equations," Economics Letters, Elsevier, vol. 83(3), pages 293-298, June. [Downloadable!] (restricted)
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  10. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Blackwell Publishing, vol. 20(3), pages 363-368, 05. [Downloadable!] (restricted)
  11. Wang, Z.K. & Winters, L.A., 1992. "The Trading Potential of Eastern Europe," Discussion Papers 92-21, Department of Economics, University of Birmingham.
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