The Governance Impact on the Romanian Trade Flows. An Augmented Gravity Model
The aim of this paper is to assess the impact of the quality of the Romanian governance process on the trade with EU countries between 2007 and 2018 using an augmented gravity model. The panel data method was used in order to cope with heteroskedasticity. The sample covers 12 years and includes 2...
Main Authors: | , |
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Format: | Article |
Language: | English |
Published: |
Academy of Economic Studies of Bucharest
2021-02-01
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Series: | Amfiteatru Economic |
Subjects: | |
Online Access: | https://www.amfiteatrueconomic.ro/temp/Article_2993.pdf |
Summary: | The aim of this paper is to assess the impact of the quality of the Romanian governance
process on the trade with EU countries between 2007 and 2018 using an augmented gravity
model. The panel data method was used in order to cope with heteroskedasticity. The
sample covers 12 years and includes 27 EU partner countries, chosen because Romania
traded with all of them, therefore the zero problem was naturally solved. EViews 10 was
used for regression. Cross-section SUR option was used.
The six governance indicators were used: voice and accountability, political stability,
government effectiveness, regulatory quality, rule of law, control of corruption. The
traditional variables (GDP, population, distance, common border, common language) had
the expected signs and values. The following governance indicators proved to be significant
for exporter countries: control of corruption with a negative influence, government
effectiveness and political stability with a positive influence, Romanian political stability
with a negative impact, Romanian rule of law with negative influence and Romanian
regulatory quality with a positive impact, while the other indicators had a negative
influence. The voice and accountability is not significant for exporter countries. An
increase with 1% of the values of the government indicators would lead to significant
increases of Romanian exports. The greatest impact on the exports would be the
improvement of Romanian regulatory quality. The low quality of the Romanian institutions
proved to be a major barrier in trading with EU countries. Therefore, an improvement of
the Romanian institutions would unleash the trade between Romania and the other EU
countries |
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ISSN: | 1582-9146 2247-9104 |