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Hub-and-Spoke or else? Free trade agreements in the “enlarged” European Union

Author

Listed:
  • Luca De Benedictis

    (DIEF – Dipartimento di Istituzioni Economiche e Finanziarie, University of Macerata, Italy)

  • Roberta De Santis

    (ISAE - Institute for Studies and Economic Analyses)

  • Claudio Vicarelli

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

The object of this paper is to estimate the effect of European Union eastwards enlargement process on trade patterns in the Union. In particular, we intend to investigate whether and how the EU Free trade agreements with CEECs have exerted a different impact on centre-periphery and intra-periphery trade relationships. This paper analyses bilateral trade flows between eight CEECs and EU- 23. We estimate a gravity equation using a “system GMM” dynamic panel data approach. Results support the assumptions that gravity forces and “persistence effects” matter. With respect to the effect of free trade agreements, evidence is found that Free trade agreements between EU countries and CEECs matter. However there is also evidence that the presence of intra-periphery agreements helped expand intra-periphery trade and limit the emergence of a “hub-andspoke” relationship between CEECs and EU. This results have important policy implications for the trade strategy of “future” EU members of the Southeastern European Countries as well as of the Southern Mediterranean Countries. According to the empirical results these countries should move towards a regional free-trade area as exemplified by the CEFTA and the BAFTA to avoid “hub-and-spoke” effects.

Suggested Citation

  • Luca De Benedictis & Roberta De Santis & Claudio Vicarelli, 2005. "Hub-and-Spoke or else? Free trade agreements in the “enlarged” European Union," ISAE Working Papers 52, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  • Handle: RePEc:isa:wpaper:52
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    More about this item

    Keywords

    Trade Flows; regional integration; EU eastwards enlargment; gravity models; Dynamic Panel data;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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