Convergence of Export-Import Flows and Economic Development in the Central and Southeast European Union

Abstract

The study presents the long- and short-term relationship between international trade flows (exports/imports) and economic development (GDP) as the main driver of international economic trade. Panel data econometric models emphasize the fixed effects of the eight Central and Southeast European Union countries. The cointegration condition is met to identify the existence of long-run equilibrium. The error correction model is the iterative short-run adjustment solution to the long-run relationship for both exports and imports. Regional trade convergence is achieved by observing the cointegration of the analyzed variables; it is described by their average levels for all countries.