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Trade integration and trade imbalances in the European Union: a network pespective

Author

Listed:
  • Gautier M. Krings
  • Jean-François Carpantier

    (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)

  • Jean-Charles Delvenne

    (ICTEAM - Institute of Information and Communication Technologies, Electronics and Applied Mathematics - UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

We study the ever more integrated and ever more unbalanced trade relationships between European countries. To better capture the complexity of economic networks, we propose two global measures that assess the trade integration and the trade imbalances of the European countries. These measures are the network (or indirect) counterparts to traditional (or direct) measures such as the trade-to-GDP (Gross Domestic Product) and trade deficit-to-GDP ratios. Our indirect tools account for the European inter-country trade structure and follow (i) a decomposition of the global trade flow into elementary flows that highlight the long-range dependencies between exporting and importing economies and (ii) the commute-time distance for trade integration, which measures the impact of a perturbation in the economy of a country on another country, possibly through intermediate partners by domino effect. Our application addresses the impact of the launch of the Euro. We find that the indirect imbalance measures better identify the countries ultimately bearing deficits and surpluses, by neutralizing the impact of trade transit countries, such as the Netherlands. Among others, we find that ultimate surpluses of Germany are quite concentrated in only three partners. We also show that for some countries, the direct and indirect measures of trade integration diverge, thereby revealing that these countries (e.g. Greece and Portugal) trade to a smaller extent with countries considered as central in the European Union network.

Suggested Citation

  • Gautier M. Krings & Jean-François Carpantier & Jean-Charles Delvenne, 2013. "Trade integration and trade imbalances in the European Union: a network pespective," Working Papers hal-01821136, HAL.
    • Handle: RePEc:hal:wpaper:hal-01821136
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    Cited by:

    1. Kireyev, A., 2019. "A Network Model of Multilateral Equilibrium Exchange Rates," Journal of the New Economic Association, New Economic Association, vol. 41(1), pages 12-33.
    2. DI SUMMA, Marco, 2013. "The convex hull of the all-different system with the inclusion property: a simple proof," LIDAM Discussion Papers CORE 2013069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Deepika Srivastava & M. Rahul, 2024. "Network analysis of trade and FDI," SN Business & Economics, Springer, vol. 4(1), pages 1-27, January.
    4. Theophilos Papadimitriou & Periklis Gogas & Fotios Gkatzoglou, 2022. "The Convergence Evolution in Europe from a Complex Networks Perspective," JRFM, MDPI, vol. 15(10), pages 1-14, October.

    More about this item

    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics

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