Zm. Jakab et al., How far has trade integration advanced?: An analysis of the actual and potential trade of three Central and Eastern European countries, J COMP ECON, 29(2), 2001, pp. 276-292
We examine the development of potential and actual trade in the Czech Repub
lic, Hungary, and Poland, using the gravity model for trade as an analytica
l device. However, recent literature indicates that the point estimates of
the: gravity equation for estimating trade potential are highly uncertain.
Hence we base our conclusions on the concept of speed of convergence to pot
ential trade. Examining only the dynamics of actual and potential trade is
less dependent on the estimation methodology. Using panel error-correction
models we find significant convergence to the estimated potential trade. We
also give an explanation for the differences in the speed of convergence a
mong the three countries based on the product-structure of exports and the
effects of foreign direct investment. The conclusions drawn from our measur
e of the speed of convergence are robust across diverse estimation methodol
ogies. (C) 2001 Academic Press.