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European free trade agreements and trade balance: Evidence from four new European Union members

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  • Guglielmo Maria Caporale
  • Christophe Rault
  • Robert Sova
  • Anamaria Sova

Abstract

This article analyses the trade balance effects of Europe agreements (EA) between the EU-15 and four new EU members from Central and Eastern Europe (CEEC-4) using both static and dynamic panel data approaches. Specifically, the system generalised method of moments (GMM, Blundell, R., and S. Bond. 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87, no. 1: 115--43) and recently developed econometric methods such as the Correlated Common Estimation Pooled--Hausman-Taylor (CCEP--HT, Serlenga, L., and Y. Shin. 2007. Gravity models of intra-EU trade: Application of the CCEP-HT estimation in heterogenous panels with unobserved common time-specific factors. Journal of Applied Econometrics 22: 361--81) are applied to analyse the effects of the agreement variable. Our estimation results indicate a positive and significant impact of EA on trade flows. However, there is an asymmetric impact of the agreement variable on the trade balance, exports and imports being affected in different ways, which results in a trade balance deficit in the CEEC-4.

Suggested Citation

  • Guglielmo Maria Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2012. "European free trade agreements and trade balance: Evidence from four new European Union members," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(6), pages 839-863, January.
  • Handle: RePEc:taf:jitecd:v:21:y:2012:i:6:p:839-863
    DOI: 10.1080/09638199.2011.555562
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    Citations

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    Cited by:

    1. P. Montalbano & S. Nenci, 2014. "Assessing the trade impact of the European Neighbourhood Policy on the EU-MED Free Trade Area," Applied Economics, Taylor & Francis Journals, vol. 46(7), pages 730-740, March.
    2. Nikolaos Antonakakis & Ioannis Chatziantoniou & George Filis, 2016. "Business Cycle Spillovers in the European Union: What is the Message Transmitted to the Core?," Manchester School, University of Manchester, vol. 84(4), pages 437-481, July.
    3. Emiliano Magrini & Pierluigi Montalbano & Silvia Nenci, 2013. "Are the EU trade preferences really effective? A Generalized Propensity Score evaluation of the Southern Mediterranean Countries' case in agriculture and fishery," Working Papers 2/13, Sapienza University of Rome, DISS.
    4. Emiliano Magrini & Pierluigi Montalbano & Silvia Nenci, 2013. "Are the EU trade preferences really effective? A Generalized Propensity Score evaluation of the Southern Mediterranean Countries' case in agriculture and fishery," Working Papers 2/13, Sapienza University of Rome, DISS.

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