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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 Working Papers with number 21.

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Date of creation: Mar 2002
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Publication status: Published as wiiw Working Paper
Handle: RePEc:wii:wpaper:21

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Related research

Keywords: Gravity model; Trade; Southeast Europe; Regionalism; Transport time; Transport costs;

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References

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  1. Jarko Fidrmuc & Jan Fidrmuc, 2000. "Disintegration and Trade," William Davidson Institute Working Papers Series 353, William Davidson Institute at the University of Michigan.
  2. 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.
  3. I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
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Cited by:
  1. repec:onb:oenbwp:y::i:105:b:1 is not listed on IDEAS
  2. Amita Batra, 2006. "India's Global Trade Potential: The Gravity Model Approach," Global Economic Review, Taylor & Francis Journals, vol. 35(3), pages 327-361.
  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. 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.
  5. Anselm Mattes & Julia Spies, 2009. "Außenwirtschaftliche Verbindungen der deutschen Bundesländer zur Republik Österreich," IAW Discussion Papers 49, Institut für Angewandte Wirtschaftsforschung (IAW).
  6. 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.
  7. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2005. "Trade Integration of Central and Eastern European Countries: Lessons from a Gravity Model," Working Papers 105, Oesterreichische Nationalbank (Austrian Central Bank).
  8. 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.
  9. Antonis Adam & James McHugh & Theodora Kosma, 2003. "Trade Liberalization Strategies," IMF Working Papers 03/239, International Monetary Fund.
  10. 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.
  11. repec:wii:bpaper:bowp:030 is not listed on IDEAS
  12. Sklias, Pantelis & Tsampra, Maria, 2011. "Assessing regional integration and business potential in the Western Balkans," MPRA Paper 36341, University Library of Munich, Germany.
  13. 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.
  14. Mario Holzner, 2004. "GSIM Measurement of the Costs of Protection in Southeast Europe," wiiw Balkan Observatory Working Papers 55, The Vienna Institute for International Economic Studies, wiiw.
  15. 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.
  16. 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.
  17. Amita Batra, 2004. "India's global trade potential: The gravity model approach," Indian Council for Research on International Economic Relations, New Delhi Working Papers 151, Indian Council for Research on International Economic Relations, New Delhi, India.

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