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Capital and Trade Flows in Europe and the Impact of Enlargement

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Author Info
Claudia M. Buch
Daniel Piazolo

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Abstract

The Eastern enlargement of the European Union (EU) is likely to give a further boost to trade and capital flows, yet empirical evidence on the possible magnitudes is still scarce. This paper uses four different datasets to estimate the determinants of international asset holdings and trade flows. We find in most regressions that EU membership has a significant effect. Based on additional simulations of the expected flows to ten transition economies, we conclude that for the EU candidates actual values are still far below expected ones in most cases. Consequently, we anticipate rising capital and trade flows with the approach of EU accession, in particular for the seven EU candidates besides the Czech Republic, Hungary and Poland.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1001.

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Length: 46 pages
Date of creation: Sep 2000
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Handle: RePEc:kie:kieliw:1001

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Related research
Keywords: EU Enlargement; International Asset Holdings; Trade; Gravity Model; Simulations.;

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Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  2. Claudia Buch, 1999. "Capital mobility and EU enlargement," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(4), pages 629-656, December. [Downloadable!] (restricted)
  3. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June. [Downloadable!] (restricted)
  4. Razin, Assaf & Sadka, Efraim & Yuen, Chi-Wa, 1998. "A pecking order of capital inflows and international tax principles," Journal of International Economics, Elsevier, vol. 44(1), pages 45-68, February. [Downloadable!] (restricted)
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  5. Stanley Fischer & Ratna Sahay & Carlos A. Végh Gramont, 1998. "How Far is Eastern Europe from Brussels?," IMF Working Papers 98/53, International Monetary Fund.
  6. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR, CES, MSH, vol. 12(24), pages 125-176, 04. [Downloadable!] (restricted)
  7. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2000. "External Capital Structure: Theory and Evidence," CEPR Discussion Papers 2583, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Schumacher, D., 1995. "Impact on German Trade of Increased Division of Labor with Eastern Europe," Papers 6, American Institute for Contemporary German Studies-.
  9. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
  10. repec:fth:michin:382 is not listed on IDEAS
  11. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Claudia M. Buch, 1999. "Capital Mobility and EU Enlargement," Kiel Working Papers 908, Kiel Institute for the World Economy. [Downloadable!]
  13. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
    Other versions:
  14. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May. [Downloadable!] (restricted)
  15. Dieter Schumacher, 1995. "Impact on German Trade of Increased Division of Labour with Eastern Europe," Discussion Papers of DIW Berlin 116, DIW Berlin, German Institute for Economic Research.
  16. Lionel Fontagné, 1999. "Foreign Direct Investment and International Trade: Complements or Substitutes?," OECD Science, Technology and Industry Working Papers 1999/3, OECD, Directorate for Science, Technology and Industry. [Downloadable!]
  17. 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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  18. Paul Brenton & Francesca Di Mauro & Matthias Lücke, 1999. "Economic Integration and FDI: An Empirical Analysis of Foreign Investment in the EU and in Central and Eastern Europe," Empirica, Springer, vol. 26(2), pages 95-121, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mitze, Timo & Alecke, Björn & Untiedt, Gerhard, 2008. "Trade, FDI and Cross-Variable Linkages: A German (Macro-)Regional Perspective," MPRA Paper 12245, University Library of Munich, Germany. [Downloadable!]
  2. Timo Mitze, 2009. "Endogeneity in Panel Data Models with Time-Varying and Time-Fixed Regressors: To IV or not IV?," Ruhr Economic Papers 0083, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  3. Hubert Strauß, 2001. "Cointegration Analysis in an Inflationary Environment: What Can We Learn from Ukraine's Nominal Exports?," Kiel Working Papers 1084, Kiel Institute for the World Economy. [Downloadable!]
  4. Horst Siebert, 2001. "Europe — Quo Vadis? Reflections on the Future Institutional Framework of the European Union," Kiel Working Papers 1064, Kiel Institute for the World Economy. [Downloadable!]
  5. Laura Ehrlich, 2002. "The EU Single Market and Customs Policy: Impact on Estonian Foreign Trade," Discussion Papers 797, The Research Institute of the Finnish Economy. [Downloadable!]
  6. J. Caetano & A. Galego & E. Vaz & C. Vieira & I. Vieira, 2002. "The Eastward Enlargement of the Eurozone: Trade and FDI," Eastward Enlargement of the Euro-zone Working Papers wp07, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Aug 2002. [Downloadable!]
  7. Helena Marques & Hugh Metcalf, 2003. "Extending the EU Single Market Eastwards: Sectoral Trade and Real Wage Effects," Discussion Paper Series 2003_10, Department of Economics, Loughborough University, revised Oct 2003. [Downloadable!]
    Other versions:
  8. Helena Marques & Hugh Metcalf, 2003. "What Determines Sectoral Trade in the Enlarged EU?," Discussion Paper Series 2003_8, Department of Economics, Loughborough University, revised Sep 2003. [Downloadable!]
    Other versions:
  9. Olivier Lamotte, 2003. "Disintegration and trade in South-eastern Europe," Cahiers de la Maison des Sciences Economiques j04031, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  10. Claudia M. Buch & Robert M. Kokta & Daniel Piazolo, 2001. "Does the East Get What Would Otherwise Flow to the South? FDI Diversion in Europe," Kiel Working Papers 1061, Kiel Institute for the World Economy. [Downloadable!]
  11. GŸl, ERTAN …ZG†ZER, 2007. "May Free Capital mobility before accession be unfavorable for admission to the EU ?," Discussion Papers (ECON - Département des Sciences Economiques) 2007035, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  12. Carmela Martin & Jaime Turrión., 2001. "The trade impact of the integration of the Central and Eastern European Countries on the European Union," European Economy Group Working Papers 11, European Economy Group. [Downloadable!]
  13. Timo Mitze & Björn Alecke & Gerhard Untiedt, 2009. "Trade-FDI Linkages in a System of Gravity Equations for German Regional Data," Ruhr Economic Papers 0084, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  14. Haselmann, Rainer & Helmut, Herwartz, 2005. "The Introduction of the Euro and its Effects on Investment Decisions," Economics Working Papers 2005,15, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
  15. Claudia M. Buch & Farid Toubal, 2003. "Economic Integration and FDI in Transition Economies: What Can We Learn from German Data?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(4), pages 594-610.
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