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Structural breaks in Austrian foreign trade with Eastern Europe during the early 1970s

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Abstract

Between 1955 and 1987, Austrian trade with Eastern Europe was characterized by specific factors. On the one hand, trade flows were influenced by the central planning system in Eastern Europe. On the other hand, Austria applied non-standard policy tools to manage Eastern trade. Furthermore, Austrian trade with Eastern Europe was affected by the implementation of the free trade agreement with the European Communities (EC) and the change in the institutional framework for Eastern trade in the early 1970s. Austrian Eastern exports were fostered by increased export subsidies and barter trade. We assess the net effects of these contradictory measures of trade policy by estimating aggregate import and export equations and testing for a structural break in 1973. Our results are consistent with the view that Austria subsidized Eastern exports to pursue a countercyclical policy after 1973.

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Notes

  1. In 1948 Moscow denied her satellite states to participate in the Marshall plan. Consequently, in 1949 the CMEA was founded. Founding members were the Soviet Union, Bulgaria, Czechoslovakia, Poland, Romania, and Hungary (see Zwass 1989; Machowski 1986). In subsequent years, Cuba, East Germany, Mongolia and Vietnam joined the CMEA, while Romania stopped participating in CMEA meetings after disputes with the Soviet Union in early 1960s. As a part of the economic transition, the CMEA was officially dissolved in Budapest in June 1991.

  2. Marin and Schnitzer (1998) show that barter and countertrade may be efficient institutions to mitigate contractual hazards which arise in technology trade, marketing and imperfect capital markets.

  3. Fidrmuc (2005) discusses the trade of Eastern Europe after 1990.

  4. According to Stankovsky (1972), the first author to study “Quasy cycles” was Olivera (1960). See also Goldmann and Kouba (1969), Goldmann (1969), Bródy (1992), Hillinger (1992), and Tarjan (1992).

  5. East-West transit trade was recorded in the balance of payments and not in the trade balance. Thus, it is not a component of the series we analyze here (Stankovsky 1990, p. 371; Combs 1985).

  6. The fact that, beginning in the 1970s, these kinds of deals played an essential role in East-West trade for more than two decades confirms Marin and Schnitzer’s proposition (see footnote 2).

  7. Given that the terms of trade affect trade vis-à-vis all countries, we work with the terms of total Austrian trade. Furthermore, country-specific terms of trade are not available for Eastern European countries.

  8. Federal Republic of Germany, France Italy, Netherlands, Switzerland and the United Kingdom.

  9. This result is consistent with Stankowsky (1972) who found that the price elasticities were generally less important in East-West trade than in trade among market economies.

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Acknowledgments

The authors would like to thank two anonymous referees for helpful comments.

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Authors and Affiliations

  1. Department of Economics, Geschwister-Scholl-Institute for Political Science, University of Munich, Geschwister-Scholl-Platz 1, 80539, Munich, Germany

    Jarko Fidrmuc

  2. CESifo, Munich, Germany

    Jarko Fidrmuc

  3. Faculty of Mathematics, Physics and Informatics, Department of Applied Mathematics and Statistics, Comenius University, Bratislava, Slovakia

    Jarko Fidrmuc

  4. Economic Studies Division, Oesterreichische Nationalbank, Otto-Wagner-Platz 3, P.O. Box 61, 1011, Vienna, Austria

    Sylvia Kaufmann

  5. Department of Economic and Social History, Vienna University of Economics and Business Administration, Augasse 2-6, 1090, Vienna, Austria

    Andreas Resch

Authors
  1. Jarko Fidrmuc
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  2. Sylvia Kaufmann
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  3. Andreas Resch
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Correspondence to Jarko Fidrmuc.

Appendix

Appendix

Table A.1: Austrian exports to E5, ARDL(2,1,1,2,1,2) specification
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Table A.2: Austrian imports from E5, ARDL(0,2,0,0,0) specification
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Fidrmuc, J., Kaufmann, S. & Resch, A. Structural breaks in Austrian foreign trade with Eastern Europe during the early 1970s. Empirica 35, 465–479 (2008). https://doi.org/10.1007/s10663-008-9068-1

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