Template-Type: ReDIF-Paper 1.0
Author-Name: Zoltán M. Jakab
Author-X-Name-First: Zoltán
Author-X-Name-Last: M. Jakab
Author-Email: jakabz@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Mihály András Kovács
Author-X-Name-First: Mihály András
Author-X-Name-Last: Kovács
Author-Email: kovacsm@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank 
Author-Name: András Oszlay
Author-X-Name-First: András
Author-X-Name-Last: Oszlay
Author-Email: 
Author-Workplace-Name: Magyar Nemzeti Bank (at the time of writing the study)

Title: How Far has Trade Integration Advanced? An analysis of actual and potential trade of three Central and Eastern European countries

Abstract: This paper investigates the trade integration of three Central and Eastern European countries, namely the Czech Republic, Hungary and Poland, using the gravity model for trade as an analytical device. Beside the usual variables in such a model, we have also incorporated the FDI variables. According to our results, in the context of the most important Western European relations, it is Hungary that achieved the highest level of integration. Czech exports have also integrated, but there is still a very considerable potential there. Poland has integrated in exports to a much smaller extent than in imports. CEFTA-oriented trade has also gone up considerably, although the level of actual trade has not yet reached its full potential, except in the Czech Republic. Vis-a-vis South-East Asia, we have found overintegration for imports, but could see no signs of convergence for export towards this region. Our estimates support the trade-enhancing role of bilateral FDI. Paradoxically, the potential trade of the three countries estimated with FDI variables appears to be less than that suggested by the basic setup of the gravity model. We formulated two hypotheses to explain this, and supported one by a probit model. Finally, we tested for convergence and found that actual data indeed converged toward the estimated trade potential.

Length: 58 pages
Creation-Date: 2000
File-URL: http://www.mnb.hu/letoltes/wp2000-1.pdf
File-Format: Application/pdf

Number: 2000/1
Classification-JEL: 
Keywords: 
Handle: RePEc:mnb:wpaper:2000/1