Abstract
International trade is the key element of globalisation and closer economic and political cooperation between countries. Regional integration is an important driver of closer trade ties among countries. In this context, the article focuses on analysing the factors, influencing the dynamics of trade patterns of the Baltic States. The research method used in the article is the gravity model of trade, which rests on the key assumption that trade between countries is defined by the size of the economies and the distance between the countries. The gravity equation estimates showed that the membership of the Baltic States in the EU had a positive effect on the export levels of the Baltic States to other EU members. On the other hand, the membership in the EU is not the main trade stimulating factor. The more important factor for the Baltic States’ exports is the former economic ties with Russia. An analysis also revealed that the Baltic States have many important trade partners with different levels of income. This finding does not support the Linder hypothesis which states that the main trading partners should have a rather similar level of income.
Highlights
International trade is the key element of globalisation and closer cooperation between world countries, both economic and political
In the case of Baltic States, both of the core parameters are significant; their importance is second to the previous economic ties with Russia and other former Soviet Union countries
The gravity model of trade rests on the presumption that the size of the economy is the main trade stimulating factor, and the main resisting factor is the distance between the trading countries
Summary
International trade is the key element of globalisation and closer cooperation between world countries, both economic and political. There are many factors that exert influence on how effectively a country participates in international trade. An important recent trend is the emergence of numerous regional trade agreements, what is currently high on the political agenda of many countries and global businesses, who are analysing the effects of the regional integration on their business prospects. In this context, the aim of this article is to find out what are the main factors influencing the trade patterns of the Baltic States. The most common tool, found in the relevant literature, is to analyse the trade patterns of those countries and the effects of various trade agreements as the gravity model of trade, which is used as the main research tool in this article
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