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Romania's integration into European markets : implications for sustainability of the current export boom

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  • Kaminski, Bartlomiej
  • Ng, Francis

Abstract

In defiance of its unimpressive track in structural reforms and relatively low foreign direct investment (FDI) inflows, Romanian exports have experienced surprisingly strong performance in both European Union (EU) and non-EU markets since 2000 after a four-year period of flat growth. While the firstphase of growth in 1992-95 can be easily explained by redirection of trade toward the EU once the state monopoly over foreign trade was abolished and other policy areas liberalized, the current second phase of export expansion raises questions concerning its drivers and sustainability. Having examined overall foreign trade performance, evolving patterns of specialization, Romania's competitiveness in EU sunrise markets, changes in factor intensities of trade with the EU, and"intra-product"trade, the authors conclude that Romania's export offer has become diversified, reflecting an impressive progress in industrial restructuring. Restructuring has been facilitated by FDI inflows, even though they appear to have been too small to generate such a big effect. Romanian firms have become increasingly part of international production networks and traditional global value chains. Sustainability of this performance depends on maintaining macroeconomic stability and keeping wage increases in line with productivity growth, as well as increasing Romania's ability to attract larger FDI inflows through improvements in business climate and trade facilitation.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3451.

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Date of creation: 01 Nov 2004
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Handle: RePEc:wbk:wbrwps:3451

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Keywords: Economic Theory&Research; Export Competitiveness; Trade Policy; Agribusiness&Markets; Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Trade Policy; Agribusiness&Markets; Environmental Economics&Policies;

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References

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  1. Simeon Djankov & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "The Regulation of Entry," Working Paper 19462, Harvard University OpenScholar.
  2. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
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  4. Damijan, Joze P. & Knell, Mark & Majcen, Boris & Rojec, Matija, 2003. "The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries," Economic Systems, Elsevier, vol. 27(2), pages 189-204, June.
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  6. Beata K. Smarzynska, 2003. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages," William Davidson Institute Working Papers Series 548, William Davidson Institute at the University of Michigan.
  7. Nada Mora & Ratna Sahay & Jeromin Zettelmeyer & Pietro Garibaldi, 2002. "What Moves Capital to Transition Economies?," IMF Working Papers 02/64, International Monetary Fund.
  8. Ng, Francis & Yeats, Alexander, 1999. "Production sharing in East Asia : who does what for whom, and why?," Policy Research Working Paper Series 2197, The World Bank.
  9. Bartlomiej Kaminski & Beata Smarzynska, 2001. "Integration into Global Production and Distribution Networks through FDI: The Case of Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 13(3), pages 265-288.
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Cited by:
  1. Kaminski, Bartlomiej & Ng, Francis, 2006. "Turkey's evolving trade integration into Pan-European markets," Policy Research Working Paper Series 3908, The World Bank.
  2. Ileana Tache & Dorin Lixandroiu, 2006. "Rent Seeking Behavior in Transition Countries: The Case of Romania," International Advances in Economic Research, Springer, vol. 12(3), pages 395-407, August.

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