Abstract
The unraveling of the Council for Mutual Economic Assistance (CMEA) in 1991 has commonly been considered one of the key factors behind the collapse of East European trade and the steep contraction of output in former CMEA member countries. Yet there have only been a few attempts to estimate the consequences of the CMEA dissolution for trade and output levels of member countries in a more systematic way.[1] While the negative impact of the CMEA dissolution on member countries’ economies is obviously undisputed, the observed falls in output and trade levels have also been caused by other important factors, such as contraction of domestic demand caused by stabilization programs, reforms, and political upheavals in Central and East European countries (CEECs) in 1990 and 1991, and the disintegration of some federal states (most notably the USSR). The aim of this paper is to shed some light on this issue by analyzing the significance of the so-called Soviet trade shock on East European economies. Specifically, an attempt is made to disentangle CMEA-specific and other causes of the observed trade collapse, and to estimate their impact on trade and output levels in the CEECs. The analysis is limited to trade of CEECs with the former Soviet Union, chiefly because it has always been much more important than trade among CEECs themselves, but also because of difficulties in obtaining reliable trade statistics on former CMEA countries.
Published Version
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