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Open Economies Review

, Volume 23, Issue 2, pp 277–301 | Cite as

Gravity Approach for Modelling International Trade in South-Eastern Europe and the Commonwealth of Independent States: The Role of Geography, Policy and Institutions

  • Oxana Babecká KucharčukováEmail author
  • Jan Babecký
  • Martin Raiser
RESEARCH ARTICLE

Abstract

Since the beginning of market reforms in 1989, countries of the South-Eastern Europe (SEE) and the Commonwealth of Independent States (CIS) trade significantly less with the world economy than those Central and Eastern European (CEE) countries which later joined the EU. To explain why this is the case, a number of hypotheses have been proposed in the literature. The key novelty of our study consists in a simultaneous assessment of the contribution to trade from geographical, policy and institutional factors, during the EU pre-accession period (1997–2004). An augmented gravity model is proposed and estimated for a reference group of 82 countries employing the Poisson and Tobit estimation techniques. We find that the low quality of economic institutions in the SEE and CIS countries contributed to a considerable proportion of their below potential international trade. We perform policy simulations using institutional data up to 2008 to identify channels for increasing international trade of the SEE and CIS.

Keywords

Gravity model of trade Poisson estimator Tobit estimator Economies of transition 

JEL Classification

F13 F15 P33 

Notes

Acknowledgements

We thank for comments and suggestions Vít Bárta, Harry Broadman, Jarko Fidrmuc, Jan Frait, Lev Freikman, Yelena Kalyuzhnova, Mathilde Maurel, Jiří Podpiera, Evgueni Polyakov, Tsvetan Tsalinski, and five anonymous referees. The views expressed in this paper are those of the authors and do not necessarily represent those of the Czech National Bank or the World Bank.

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Oxana Babecká Kucharčuková
    • 1
    • 2
    Email author
  • Jan Babecký
    • 1
    • 2
  • Martin Raiser
    • 3
  1. 1.Czech National BankPragueCzech Republic
  2. 2.CES, University of Paris 1ParisFrance
  3. 3.World BankKievUkraine

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