THE EXISTENCE OF FOREIGN TRADE BALANCE CONVERGENCE IN EU MEMBER AND CANDIDATE COUNTRIES: AN EMPIRICAL ANALYSIS

Yıl 2021, Cilt: 2 Sayı: 1, 57 - 80, 29.06.2021

Oğuzhan Özçelik , Hasan Bardakçi

https://doi.org/10.51969/klusbmyo.945223

Öz

The foreign trade deficit is an important problematic area for all countries, and it is the main cause of the current account deficit and the economic crises. It is useful to frequently analyze the level of these deficits. In this study, the presence of convergence among the EU member and candidate countries in terms of the foreign trade balance was analyzed with second-generation panel data analysis methods, operating under cross-sectional dependence, by using data from the 2000-2019 period. In the study, firstly the existence of cross-sectional dependence among the countries was analyzed and it was found that there was cross-sectional dependence among the countries included in the panel.
In this study, firstly, CADF and HK panel unit root tests were carried out in order to test the existence of each country group's convergence to their group average; then in the country groups other than EU candidate countries, i.e., in the 36-country panel, in the EU28, EU15, and EU13 countries, it was determined that there was a convergence towards their own group means in terms of the foreign trade balance.
Furthermore, the convergence of the country groups to the group average of the EU15 was tested by CADF and HK methods; and it was determined that the 36-country panel, the EU28, EU13 countries, and the EU candidate countries tend to converge towards the foreign trade balance of the EU15.
Finally, the convergence of EU candidate countries to the EU13's foreign trade balance average was tested by CADF and HK methods, and according to the CADF tests, the EU candidate countries were unable to converge to the EU15 countries were also not able to converge to the EU13 countries. However, according to the HK test results, it was determined that the foreign trade balance of the 8 EU candidate countries converged to the foreign trade balance of the 13 countries that became members of the EU later. The robustness check was performed by using Fisher ADF, Fisher PP, LLC, and IPS panel unit root tests, and the results obtained were found to be consistent.

Anahtar Kelimeler

Convergence, Foreign Trade Balance, Cross Sectional Dependence, Panel Unit Root Test

Kaynakça

• ARESTIS, P., CHORTAREAS, G., MAGKONIS, G. and MOSCHOS, D. (2014). Inflation Convergence and Inflation Targeting: International Evidence, Journal of International Financial Markets, Institutions and Money, Vol: 31, s. 285-295.
• ATALAY, S.S. (2007). Real Convergence in the New EU Countries and Turkey. Central Bank of Turkey Republic, Specialization Qualification Thesis, Ankara.
• ATO (2003). 30 Industries have a Chinese Invasion, https://www.hurriyet.com.tr/ekonomi/30- sektorde-cin-istilasi-var-191036, Access Date: 01.04.2021.
• BALTAGI, B.H. (2005). Econometric Analysis of Panel Data, (Third Edition), John Wiley & Sons Gmbh, West Sussex, England.
• BALTAGI, B.H. and PESARAN, M.H. (2007). Heterogeneity and Cross Section Dependence in Panel Data Models: Theory and Applications, Journal of Applied Econometrics, Vol: 22, s.229–232.
• BALTAGI, B. H, FENG, Q. and KAO C. (2012). A Lagrange Multiplier test for Cross-sectional Dependence in a Fixed Effects Panel Data Model, Journal of the Econometrics, Vol: 170, s.164–177.
• BARRO, R.J. and SALA-I-MARTIN, X. (1990). Economic Growth and Convergence Across the United States, NBER Working Papers, No. 3419.
• BAUMOL, W.J. (1986). Productivity Growth, Convergence and Welfare: What the Long-Run Data Show? The American Economic Review, Vo: 76(5), s.1072 – 1085.
• BREUSCH, T. S. and PAGAN, A.R. (1980). The Lagrange Multiplier Test and Its Applications to Model Specification Tests in Econometrics, Review of Economic Studies, Vol: 47, s.239-53.
• BURKETT, P. and HART-LANDSBERG, M. (2003). A Critique of “Catch-Up” Theories of Development, Journal of Contemporary Asia, Vol: 33(2), s.147-171.
• DORNBUSCH, R. and FISCHER, F. (1990). Macroeconomics, McGraw-Hill, International Editions.
• DURLAUF, S.N. and JOHNSON, P.A. (1995). Multiple Regimes and Cross-Country Growth Behavior, Journal of Applied Econometrics, Vol: 10(4), s.365-384.
• EUROPEAN COMMISSION (2015). European Structural and Investment Funds 2014-2020: Official Texts and Commentaries, https://ec.europa.eu/regional_ policy/sources/docgener/guides/blue_book/blueguide_en.pdf, Access Date:19.03.2021.
• EUROPEAN COMMISSION (2021). Convergence Criteria for Joining, https://ec.europa.eu/info/business-economy-euro/euro-area/enlargement-euroarea/convergence-criteria-joining_en, Access Date: 19.03.2021.
• FREUND, C. L. (2000). Current Account Adjustment in Industrialized Countries, Board of Governors of the FED International Finance, Discussion Papers, No. 692
• GALOR, O. (1996). Convergence? Inference from Theoretical Models, Economic Journal, Vol: 206, s. 1056 – 1069.
• GENCOGLU, P., KUSKAYA, S. and BUYUKNALBANT, T. (2020). Evaluation of Sustainability of Health Expenditures in The Selected OECD Countries with Panel Unit Root Tests, Ankara University SBF Journal, Vol: 75(4), s.1283-1297.
• GOGUL, P.K. and KORAP, L. (2014). New Evidence Upon Testing the Issue of Economic Convergence: OECD Evidence, Kastamonu University Journal of Faculty of Economics and Administrative Sciences, Vol: 4, s.60-73.
• HADRI, K., and KUROZUMI, E. (2012). A Simple Panel Stationarity Test in The Presence of Serial Correlation and A Common Factor, Economics Letters, Vol: 115(1), s. 31-34.
• HAWKINS, J. and TURNER, P. (2008). Managing Foreign Debt and Liquidity Risks in Emerging Economies: An Overview, https://www.bis.org/publ/plcy08a.pdf, Access Date: 19.03.2021.
• IMF (2020). Direction of Trade Statistics (DOTS), https://data.imf.org/?sk=9D6028D4-F14A464C-A2F2-59B2CD424B85, Access Date: 16.03.2021.
• IM, K. S., PESARAN, M. H. and SHIN, Y. (2003). Testing for Unit Roots in Heterogeneous Panels, Journal of Econometrics, Vol: 115, s.53–74.
• LABONTE, M. (2010). Is the U.S. Current Account Deficit Sustainable? Congressional Research Service, No. 7-5700.
• LEVIN, A., LIN, C. F. and CHU, C. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties, Journal of Econometrics, Vol. 108, s.1–24.
• LOPEZ, C. and PAPELL, D. H. (2012). Convergence of Euro Area Inflation Rates, Journal of International Money and Finance, Vol: 31(6), s.1440-1458.
• LUCAS, R.E. (2000). Some Macroeconomics for the 21st Century, Journal of Economic Perspectives, Vol: 14(1), s.159–168.
• MADDALA, G. S. and WU, S. (1999). A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test, Oxford Bulletin of Economics and Statistics, Vol: 61, s.631-652
• OZDAMAR, G. (2015). Factors Affecting Current Account Balance of Turkey: A Survey with The Cointegrating Regression Analysis, Journal of Business, Economics & Finance, Vol: 4(4), s.633-658.
• PESARAN, M. H. (2004). General Diagnostic Tests for Cross Section Dependence in Panels, Cambridge Working Papers in Economics, No. 435.
• PESARAN, M.H. (2007). A Simple Panel Unit Root Test in The Presence of Cross-Section Dependence, Journal of Applied Econometrics, Vol: 22, s.265–312.
• ROWTHORN, R. and RAMASWAMY, R. (1997). Deindustrialization: Causes and Impacts, IMF Working Paper, No. WP/97/42.
• SAMUE, A. (2019). International Trade and Its Impact on the Global Economy, Kenyatta University.
• SARACOGLU, B. and DOGAN, N. (2005). “Convergence Analysis of European Union Countries and European Union Candidate Countries”, 7th National Econometrics and Statistics Symposium, 26-27 May, Istanbul.
• SOLOW, R.M. (1956). A Contribution to the Theory of Economic Growth, The Quarterly Journal of Economics, Vol: 70(1), s.65–94.
• STRAZICICH, M. C., LEE, J. and DAY, E. (2004). Are Incomes Converging Among OECD Countries? Time Series Evidence with Two Structural Breaks, Journal of Macroeconomics, Vol: 26(1), s.131-145.
• SUL, D., PHILLIPS, P.C.B. and CHOI, C.Y. (2005). Prewhitening Bias in HAC Estimation,Oxford Bulletin of Economics and Statistics, Vol: 67, s.517–546.
• SWAN, T.W. (1956). Economic Growth and Capital Accumulation, Economic Record, Vol: 32, s.334-361.
• VARBLANE, U. and VAHTER, P. (2005). An Analysis of The Economic Convergence Process in The Transition Countries, Tartu University Press, No. 241.
• WORLD BANK (2020a). Merchandise Exports (Current US$), https://data.worldbank.org/indicator/TX.VAL.MRCH.CD.WT?view=chart, Access Date: 16.03.2021
• WORLD BANK (2020b). Merchandise Imports (Current US$), https://data.worldbank.org/indicator/TM.VAL.MRCH.CD.WT?view=chart, Access Date: 16.03.2021.
• WORLD BANK (2021c). New World Bank Country Classifications by Income Level: 2020-2021. https://blogs.worldbank.org/opendata/new-world-bank-country-classificationsincome-level-2020-2021, Access Date: 16.03.2021.
• WORLD BANK (2021d). GDP per capita (current US$). https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?view=chart, Access Date: 16.03.2021.
• WORLD BANK (2021e). GDP (current US$). https://data.worldbank.org/indicator/ NY.GDP.PCAP.CD?view=chart, Access Date: 16.03.2021.
• YILANCI, V. and ERIS, Z.A. (2013). Purchasing Power Parity in African Countries: Further Evidence from Fourier Unit Root Tests Based on Linear and Nonlinear Models, South African Journal of Economics, Vol: 81(1), s.20-34.