Analysing trade integration of the European Union with the gravity model of trade

An approach based on the law of gravity for studying of international trade flows has been widely used in recent years.  Gravity model based studies have achieved empirical success in explaining various” flows”, for example international trade. Due to simplicity, high explanatory ability and improved econometrics the model is convenient as an examination tool for researchers. The objective of this research is to provide an overview of the the European Union (EU) enlargement process in the period between 2000 and 2014 by means of a gravity model, as well as to estimate and measure trade growth as a consequence of the opening up of trade in the EU. The EU with 28 members has reached though its unified market and monetary union a high degree of economic integration.  This is a unique process not only in Europe but also in the world, since there has not been any such integrative cooperation yet to go as far as that. New, common policies have been elaborated in the EU, which have gradually expanded along with the deepening of the integration. As a logical consequence of the integrative process the common trade policy has become one of the decisive policies of the integration, showing the uniform external economic attitude of the EU towards the countries outside its borders.

What was the effect of EU enlargement on trade within and outside the EU? I find that the EU enlargement has large and significant effects on both old and new members' trading activities. Old and new members both increased their exports; new members decreased their imports from the rest of the world. The novelty to research lies in the methodology of the econometric model.

The goal is  also to map the European economic space, applying the gravity model. The investigation covers those countries, which have been close relationship for centuries. They put the formation of spatial layout in a core—periphery relationship. Moving eastwards, away from the dynamic core area, the value of the economic potential gradually decreases. The transformation of the Central-Eastern European structures “affecting each other” is indirectly “governed” by the processes in the neighbouring central areas. The “core” can be indeed imagined as a centre, from which fields of differing strengths emerge one after the other. As a result, an extended periphery comes into being around the core area of Europe, comprised of members of the Mediterranean and Central-Eastern regions.