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Journal of Economic Integration 2020 March;35(1) :39-68.
DOI: https://doi.org/10.11130/jei.2020.35.1.39
Spillover Effects of Trade Shocks in the Central and Eastern European and Baltic Countries
Nazmus Sadat Khan 
The World Bank, Dhaka, Bangladesh
University of Muenster, Muenster, Germany
Corresponding Author: Nazmus Sadat Khan ,Tel: +88 01729236599, Email: nkhan12@worldbank.org
Copyright ©2020 Journal of Economic Integration
ABSTRACT
How does a trade shock occurring in each Central and Eastern European and Baltic country affect the economic growth and inflation of other CEE-Baltic countries? This paper addresses this question by comparing the spillover effects of trade shocks using a global vector auto-regression model with 10 CEE-Baltic countries. In constructing the foreign variables, a time-varying trade weight is used instead of a fixed weight. Oil price is included as a global variable because of its importance to the countries in the region. The results demonstrate that the trade spillover effects are strong in the region and have a positive impact on economic growth and inflation in the region. However, the Czech Republic, Slovakia, and Poland play a greater role in this transmission process than the other countries.

JEL Classification
C32: Time Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
F43: Economic Growth of Open Economies
O47: Measurement of Economic Growth; Aggregate Productivity; Cross Country Output Convergence
Keywords: Trade | Spillover Effects | Global Vector Auto-Regression | Central and Eastern European and Baltic Countries
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