Converging in Divergent Ways

38 Pages Posted: 6 Sep 2017

See all articles by Ernest Dautović

Ernest Dautović

European Central Bank

Lucia Orszaghova

European Central Bank (ECB)

Willem Schudel

De Nederlandsche Bank

Date Written: October 2017

Abstract

This paper focuses on intra‐industry trade (IIT) between Central, Eastern and South‐Eastern European (CESEE) countries and the EU‐15. It assesses the determinants of intra‐industry trade by combining a detailed product‐level (HS‐6) trade‐flow database with country‐level structural, monetary and institutional variables. Estimates are obtained with System‐GMM and dynamic fractional response models. Our results suggest that structural factors driving IIT differ in the region, notably perceptions of corruption and the distance in the stock of physical capital from the EU‐15. On the other hand, nominal variables such as the competitiveness of corporate taxation and the flexibility of exchange rate regimes contribute to the increase in intra‐industry trade in the whole region.

Keywords: Intra‐industry trade, European economic integration, real convergence, fractional response panel data

Suggested Citation

Dautović, Ernest and Orszaghova, Lucia and Schudel, Willem, Converging in Divergent Ways (October 2017). Economics of Transition, Vol. 25, Issue 4, pp. 625-662, 2017, Available at SSRN: https://ssrn.com/abstract=3031022 or http://dx.doi.org/10.1111/ecot.12132

Ernest Dautović (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Lucia Orszaghova

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Willem Schudel

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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