Fidrmuc, Jark; Djablik, Martin --- "Intra-industry trade between the EU and the acceding countries: the impact of foreign direct investment on trade structures" [2004] ELECD 156; in Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris (eds), "The Economic Potential of a Larger Europe" (Edward Elgar Publishing, 2004)

Book Title: The Economic Potential of a Larger Europe

Editor(s): Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843769620

Section: Chapter 11

Section Title: Intra-industry trade between the EU and the acceding countries: the impact of foreign direct investment on trade structures

Author(s): Fidrmuc, Jark; Djablik, Martin

Number of pages: 17

Extract:

11. Intra-industry trade between the
EU and the acceding countries: the
impact of foreign direct investment
on trade structures
Jarko Fidrmuc and Martin Djablik1

1. INTRODUCTION

Recent economic developments in the acceding countries reflect the fact
that, first, macroeconomic and microeconomic disequilibria were rapidly
removed during the initial years of economic reform and that, second, eco-
nomic developments in the (largely) transformed economies remain more
dynamic than those in OECD countries.
The stabilization policy proposed in Central and Eastern Europe to reach
macroeconomic as well as microeconomic equilibrium necessitated dra-
matic adjustments in the initial years of economic reform. Following the
removal of price controls, high inflation or even hyperinflation was
observed, but inflation quickly stabilized at relatively low rates (see Backé
et al., 2003). In the more advanced Central and Eastern European countries
(CEECs) it took just a few years to remove inefficient production structures
and nearly complete privatization (see Djankov and Murrell, 2002). As a
result, the CEECs experienced output declines by a significant fraction of
GDP and unemployment peaked at internationally high levels (see Svejnar,
2001).
Fundamental changes have also been observed in the CEEC's trade
orientation. Based on gravity model predictions, Hamilton and Winters
(1992) foresaw a significant growth spurt to the `potential level' of trade
between CEECs and the EU. Fidrmuc and Fidrmuc (2003) document that,
with the most recent efforts, this adjustment to the equilibrium level has
nearly been completed.
This chapter compares the patterns of EU trade between 1989 and 2001
...