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A Gravity Model Approach to Estimating Prospective Trade Gains in the EU Accession and Associated Countries

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  • Marie Stack
  • Eric Pentecost

Abstract

Examining the trade prospects for the new European Union (EU) member states and the EU associated partner countries is an important issue in the context of European eastward enlargement and greater economic integration with its immediate neighbours. An out-ofsample approach to projecting trade volumes for twenty countries of interest is adopted using a gravity equation for a panel data set of bilateral export flows from twelve EU countries to twenty OECD trading partners over the 1992-2003 period. The potential trade volumes are calculated from a gravity model of new trade theory (NTT) determinants. The selected twenty countries’ prospects for further trade integration vis-à-vis the EU can be gauged by expressing the trade volume projections as a ratio of actual trade volumes for each pair of countries. The projected trade ratios for the ten new member states are found to be multiples of actual 2003 levels, indicating that trade expansion looks set to continue. Near unity values, however, are more frequent among the Mediterranean countries, indicating fewer opportunities for further trade integration with the EU.

Suggested Citation

  • Marie Stack & Eric Pentecost, 2011. "A Gravity Model Approach to Estimating Prospective Trade Gains in the EU Accession and Associated Countries," NBS Discussion Papers in Economics 2010/11, Economics, Nottingham Business School, Nottingham Trent University.
    • Handle: RePEc:nbs:wpaper:2010/11
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    Cited by:

    1. Beyhan Bektasoglu & Tanja Engelbert & Martina Brockmeier, 2017. "The Effect of Aggregation Bias: An NTB-modelling Analysis of Turkey's Agro-food Trade with the EU," The World Economy, Wiley Blackwell, vol. 40(10), pages 2255-2276, October.
    2. Ebaidalla Mahjoub Ebaidalla & Mohammed Elhaj Mustafa Ali, 2018. "Assessing the Intra-Arab Trade Integration and Potential: Evidence from Stochastic Frontier Gravity Model," Working Papers 1247, Economic Research Forum, revised 07 Nov 2018.
    3. Geetha Ravishankar Author name: Marie Stack, 2013. "The Gravity Model and Trade Efficiency: A Stochastic Frontier Analysis of Potential Trade," NBS Discussion Papers in Economics 2013/04, Economics, Nottingham Business School, Nottingham Trent University.

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    More about this item

    Keywords

    Panel data; Gravity model; Trade integration;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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