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Journal of Economic Integration 1999 December;14(4) :651-664.
An Analysis of Trade Relations between the European Union and the Transition Economies of Central and Eastern Europe

Panagiotis Liargovas Christos Papazoglou 

Athens University
University of Crete
Copyright ©1999 Journal of Economic Integration
This paper empirically determines the main factors influencing trade flows between the European Union and the transition economies of Central and Eastern Europe. The analysis relies on the estimation of gravity-type equations for both exports and imports. Besides the basic variables that are normally included in a gravity equation, such as the size of the market, population and distance, two additional variables are included capturing the process of liberalization and privatization. Our results indicate that the two transition variables constitute important factors responsible for the moderate level of trade integration between the transition economies of the Black Sea region (BSEC) and the European Union (EU) member-states. This outcome is in direct conflict with the corresponding results for the more advanced transition economies of Central European Countries (CECs) where the particular variables appear insignificant. This is a reflection of the fact that, contrary to the experience of the BSEC countries, transition policies in the CECs have been proceeded much more vigorously. (JEL Classifications: F15, O52, P51)
Keywords: transition economies | BSEC | CECs | EU | trade relations | gravity model
1. Bergstrand, H.J. [1985], "The Gravity Equation in International Trade : Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics 67; 474-481.
2. Graziani, G. [1992], "Trade Patterns and Specialization of Central and Eastern Europe in EC Markets," Paper Presented at IIASA Conference on International Trade and Restructuring in Eastern Europe, Laxenburg, Austria, November.
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