The Dynamics of Intra-European Trade and the Heterogeneities between the Euro Area and Ceec

Abstract

This paper investigates to what extent euro area membership affected the differing dynamics of trade integration for CEE economies during the period 1997-2009. Using the CEPII-BACI database, we get three main results. First, until the recent financial crisis of 2008, most of the increase in bilateral trade within the European Union was mainly due to increased flows between the 11 founding Eurozone members. Second, bilateral trade between Eurozone countries occurs mainly at the intensive margin, and only smaller countries at the periphery of the EMU are characterized by a significant extensive margin. Third, in contrast, East European countries are characterized by the greater importance of the extensive margin.