Intra-Industry Trade between CESEE Countries and the EU15

37 Pages Posted: 20 Aug 2014

See all articles by Ernest Dautović

Ernest Dautović

European Central Bank

Lucia Orszaghova

European Central Bank (ECB)

Willem Schudel

European Central Bank (ECB)

Date Written: August 5, 2014

Abstract

The rapid increase in intra-industry trade (IIT) between the EU15 and Central, Eastern and South-Eastern European (CESEE) countries after the collapse of the Soviet Union indicates a structural change in the nature of trade in CESEE and a new process of transition and real convergence to the EU. Using a product-level trade flows database and employing linear and non-linear panel data specifications, this paper assesses the determinants of intra-industry trade between the EU15 as the main trading block and CESEE, which are further divided into the ‘new’ EU member states (NMS) and the EU candidate countries and potential candidates (CCPC). The analysis highlights the importance of intra-industry trade in terms of achieving real convergence. The paper finds that there exist some common factors driving IIT across the sample, such as the corporate tax rate, the flexibility of exchange rate regimes and the quality of political institutions. However, the determinants of IIT between NMS and EU15 countries deviate considerably from those between CCPC and EU15 countries.

Keywords: intra-industry trade, real convergence, transition, emerging Europe, economic integration, Central and Eastern Europe, South-Eastern Europe, vertical IIT, horizontal IIT, Western Balkan, panel data, EU candidate countries, convergence criteria

JEL Classification: F14, F15, F10

Suggested Citation

Dautović, Ernest and Orszaghova, Lucia and Schudel, Willem, Intra-Industry Trade between CESEE Countries and the EU15 (August 5, 2014). ECB Working Paper No. 1719, Available at SSRN: https://ssrn.com/abstract=2476375 or http://dx.doi.org/10.2139/ssrn.2476375

Ernest Dautović (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Lucia Orszaghova

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Willem Schudel

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
91
Abstract Views
639
rank
359,295
PlumX Metrics