The effects of competing trade regimes on bilateral trade flows: case of Serbia

• Main Authors: Predrag Bjelić, Radmila Dragutinović Mitrović
• Format: Article
• Language: deu
• Published: Faculty of Economics University of Rijeka 2012-12-01
• Series: Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu
• Subjects: Trade regimes; gravity model; trade potentials; panel data
• Online Access: https://www.efri.uniri.hr/sites/efri.hr/files/cr-collections/2/03-bjelic-2012-2-1369047113.pdf

The aim of this paper is to investigate the effects of competing trade regimes on Serbian trade with its most significant (traditional) partners, like European Union and CEFTA 2006 signatories, and other untraditional trade partners with favourable trade regime, like the USA. To this end, gravity model with bilateral and time effects is estimated by Hausman-Taylor AR(1) instrumental variable estimator, using panel data on bilateral trade between Serbia and its main trade partners during the period 2001-2010. The results indicate that overall level of development and difference in factor endowments stimulate Serbia’s exports, which is in accordance with theoretical foundation that inter-industry trade is predominant in exports of less developed countries. Moreover, competing trade regimes appear as important determinant of Serbia’s trade relations, whereas additional liberalization of trade regime with the USA as untraditional trade partner, even asymmetrical to Serbia’s favour, cannot divert trade flows from traditional partners in the long-run. This could mean that distance plays more prominent role in bilateral trade than the degree of liberalization of trade regimes in case of Serbia. The result could be due to the contemporaneous effects of trade preferences granted to Serbia by the EU and other CEFTA 2006 signatories, main trading partners of Serbia.