On the patterns of trade convergence in European transition countries
AbstractIn current study we analyze the convergence of trade between Central and Eastern European countries (CEECs) and European Union (EU) during the period from 1984 to 2004. In our extension of the theoretical framework of Helpman, Melitz and Rubinstein (2005) with heterogeneous firms we discuss the influence of economic fundamentals and trade cost on extensive and intensive margins of trade. Then, we use gravity model of trade to calculate potentials for CEECs trade with EU-15 countries. As a result, we develop convergence measures for CEECs exports and imports trade flows with EU-15. Moreover, we provide decomposition of trade flows on extensive and intensive margins, and construct convergence measures for each of the trade components. Finally, we analyze the mechanics of trade convergence process in selected CEECs. Current paper contributes to better understanding of trade convergence patterns in European transition countries, providing policy-makers in transition economies with useful insights on the role of different trade components in the convergence process.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14109.
Date of creation: Feb 2007
Date of revision:
trade convergence; gravity model; extensive and intensive margins; Hummels-Klenow decomposition;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
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