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Potential Trade in Southeast Europe: A Gravity Model Approach

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  • Edward Christie

Abstract

This paper estimates a classical gravity model for trade on aggregate trade volumes between OECD and transition countries. The results are used to analyse and make projections on trade flows into and out of Southeast European countries following scenarios on potential GDP levels and possible membership of institutions. Alternative variables are also tested, namely transport times instead of geographical distance, and GDP in PPP instead of nominal. Replacing distance with transport times does not lead to great improvements in the model's performance. The use of GDP at PPP is presented mainly to try to deal with specific situations where local prices prevail. The striking feature that emerges in Southeast Europe is of flows of extreme values, in some cases far below, but in others far above, what classical gravity model estimates show. The main conclusion is that Southeast Europe can no longer be viewed as a region from the point of view of aggregate trade flows.

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Bibliographic Info

Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Balkan Observatory Working Papers with number 011.

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Date of creation: Dec 2001
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Publication status: Published as The wiiw Balkan Observatory Working Paper, December 2001
Handle: RePEc:wii:bpaper:bowp:011

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References

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  1. Fidrmuc, Jan & Fidrmuc, Jarko, 2000. "Disintegration and Trade," CEPR Discussion Papers 2641, C.E.P.R. Discussion Papers.
  2. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  3. Fritz Breuss & Peter Egger, 1999. "How Reliable Are Estimations of East-West Trade Potentials Based on Cross-Section Gravity Analyses?," Empirica, Springer, vol. 26(2), pages 81-94, June.
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Citations

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Cited by:
  1. Maria Paula Fontoura & Enrique Martínez-Galán & Isabel Proença, 2006. "Trade Potential in an Enlarged European Union: A Recent Approach," Working Papers Department of Economics 2006/08, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. Mojsoska-Blazevski, Nikica & Petreski, Marjan, 2010. "Western Balkan’s trade with the EU and CEFTA-2006: Evidence from Macedonian data," MPRA Paper 41942, University Library of Munich, Germany.
  3. Mili Roy & Md. Israt Rayhan, 2011. "Trade Flows of Bangladesh: A Gravity Model Approach," Economics Bulletin, AccessEcon, vol. 31(1), pages 950-959.
  4. Dascalescu, Virgil & Nicolae, Elena & Ion, Irina, 2010. "New Findings on Actual and Potential Trade between Romania and the Russian Federation: A Gravity Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 102-124, December.
  5. Marjan Petreski, 2013. "Southeastern European Trade Analysis: A Role for Endogenous CEFTA-2006?," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 49(5), pages 26-44, September.
  6. Sklias, Pantelis & Tsampra, Maria, 2011. "Assessing regional integration and business potential in the Western Balkans," MPRA Paper 36341, University Library of Munich, Germany.
  7. Jože P. Damijan & José De Sousa & Olivier Lamotte, 2006. "The Effect of Trade Liberalization in South-Eastern European Countries," wiiw Balkan Observatory Working Papers 070, The Vienna Institute for International Economic Studies, wiiw.
  8. Amita Batra, 2006. "India's Global Trade Potential: The Gravity Model Approach," Global Economic Review, Taylor & Francis Journals, vol. 35(3), pages 327-361.
  9. Antonis Adam & James McHugh & Theodora Kosma, 2003. "Trade Liberalization Strategies: What Could South Eastern Europe Learn From CEFTA and BFTA?," IMF Working Papers 03/239, International Monetary Fund.
  10. Vladimir Gligorov & Mario Holzner & Michael Landesmann, 2003. "Prospects for Further (South) Eastern EU Enlargement: Form Divergence to Convergence?," wiiw Balkan Observatory Working Papers 030, The Vienna Institute for International Economic Studies, wiiw.
  11. Will Bartlett, 2009. "Regional integration and free-trade agreements in the Balkans: opportunities, obstacles and policy issues," Economic Change and Restructuring, Springer, vol. 42(1), pages 25-46, May.
  12. Mario Holzner, 2004. "GSIM Measurement of the Costs of Protection in Southeast Europe," wiiw Balkan Observatory Working Papers 055, The Vienna Institute for International Economic Studies, wiiw.
  13. repec:nrb:wpaper:nrbwp192013 is not listed on IDEAS
  14. Balasan, Andrei-Cristian, 2012. "Literature review concerning the relationship between globalization and regionalization in the world economy," MPRA Paper 39746, University Library of Munich, Germany.
  15. Bussière, Matthieu & Fidrmuc, Jarko & Schnatz, Bernd, 2005. "Trade integration of Central and Eastern European countries: lessons from a gravity model," Working Paper Series 0545, European Central Bank.
  16. Olivier Lamotte, 2003. "Disintegration and trade in South-eastern Europe," Cahiers de la Maison des Sciences Economiques j04031, Université Panthéon-Sorbonne (Paris 1).
  17. Rahman, Mohammad Mafizur, 2005. "The Determinants of Bangladesh's Trade: Evidence from the Generalized Gravity Model," Working Papers 3, University of Sydney, School of Economics.
  18. repec:onb:oenbwp:y::i:105:b:1 is not listed on IDEAS
  19. Kaminski, Bartlomiej & de la Rocha, Manuel, 2003. "Stabilization and association process in the Banlkans : integration options and their assessment," Policy Research Working Paper Series 3108, The World Bank.
  20. Edward Christie, 2004. "Trade Flows in Southeast Europe," wiiw Balkan Observatory Working Papers 059, The Vienna Institute for International Economic Studies, wiiw.
  21. Miran, Bülent & Atış, Ela & Bektaş, Zerrin & Salalı, Ece & Cankurt, Murat, 2013. "An Analysis of International Raisin Trade: A Gravity Model Approach," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152200, Australian Agricultural and Resource Economics Society.
  22. Vassilis Monastiriotis, 2008. "Quo Vadis Southeast Europe? EU Accession, Regional Cooperation and the need for a Balkan Development Strategy," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 10, Hellenic Observatory, LSE.

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