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Review of Middle East Economics and Finance

Ed. by Dibeh, Ghassan / Assaf, Ata / Cobham, David / Hakimian, Hassan / Henry, Clement M.

3 Issues per year

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A Tale of Parallel Integration Processes: A Gravity Analysis of EU Trade with Mediterranean and Central and Eastern European Countries

Francesco Pastore1 / Anna Maria Ferragina2 / Giorgia Giovannetti3

1Seconda Università di Napoli and IZA

2Università di Salerno

3Università di Firenze

Citation Information: Review of Middle East Economics and Finance. Volume 5, Issue 2, Pages 21–44, ISSN (Online) 1475-3693, DOI: 10.2202/1475-3693.1228, September 2009

Publication History:
Published Online:
2009-09-14

Despite the EU emphasis on the 1995 Barcelona process, trade integration with the Mediterranean (MED) countries is still underdeveloped. To contrast the success of EU integration with MED countries and that with the new EU members, we compute the trade potential of these EU partners from 1995 to 2002 using an "out-of-sample" methodology. The coefficients are taken from different panel estimators of the gravity equation relative to intra-EU trade. Our analysis suggests the existence of sizeable, unexploited trade potential with both groups of partners, although the ratio of potential to actual trade with the MED countries is much larger (from 1.7 to 2.5 times), more dispersed and stable compared to that with the CEECs.

Keywords: MED agreements; Europe agreements; Eastward EU enlargement; gravity equation; trade potential

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