Does the Foreign Trade-Driven Competitive Power of Transition Economies Converge Toward that of EU14 Countries? Evidence from Fourier Panel Unit Root Test with Sharp and Smooth Breaks
Oğuzhan ÖzçelikThis study analyzed whether the foreign trade-driven competitive power of the 13 transition economies (i.e., Albania, Bulgaria, Czech Republic, Estonia, Croatia, Latvia, Lithuania, Hungary, Macedonia, Poland, Romania, Slovenia, and Slovakia) converges toward that of the 14 main European Union countries (EU14) for the period of 1993:M01–2021:M08. The study used the Fourier panel unit root test with sharp and smooth breaks developed by Bahmani-Oskooee et al. (2014). The presence of a cross-sectional dependence among transition economies was examined using tests developed by Breusch and Pagan (1980) LM, Pesaran (2004) LMS, and Baltagi et al. (2012) LMBC. A cross-sectional dependence was observed among these countries. According to individual results obtained from the panel unit root test developed by Bahmani-Oskooee et al. (2014), by considering cross-sectional dependence, all countries except for Croatia were found to be in a closer position to EU14 countries in terms of foreign trade-driven competitive power. Considering the presence of sharp and smooth structural breaks in series, the analyses on the overall panel revealed that the 13 transition economies, which are included in the panel, converge toward EU14 countries in terms of foreign trade-driven competitive power. The testing method was able to successfully determine the sharp and smooth structural breaks in these countries. Moreover, the findings show that transition economies that joined the EU at a later stage or are candidates for the EU have been successfully carrying out the EU harmonization process. From another aspect, the EU is increasing their foreign trade-driven competitive power by providing them with financial and technical support.
PEGSÜ Ülkelerinin Dış Ticaret Rekabet Gücü AB14 Ülkelerine Yakınsıyor mu? Ani ve Yumuşak Değişimli Fourier Panel Birim Kök Testinden Kanıtlar
Oğuzhan ÖzçelikBu çalışmada pazar ekonomisine geçiş sürecinde olan 13 ülkenin (PEGSÜ; Arnavutluk, Bulgaristan, Çek Cumhuriyeti, Estonya, Hırvatistan, Letonya, Litvanya, Macaristan, Makedonya, Polonya, Romanya, Slovenya ve Slovakya) dış ticaret rekabet güçlerinin, Avrupa Birliğinin 14 temel üyesinin (AB14) dış ticaret rekabet gücüne yakınsaması, 1993:M01- 2021:M08 dönemi için, Bahmani-Oskooee vd. (2014) tarafından geliştirilen ani ve yumuşak değişimli Fourier panel birim kök testiyle analiz edilmiştir. PEGSÜ ülkeleri arasında yatay kesit bağımlılığının varlığı Breusch ve Pagan (1980) LM, Pesaran (2004) LMS ve Baltagi vd. (2012) LMBC testleriyle incelenmiş ve bu ülkeler arasında yatay kesit bağımlılığının varlığı görülmüştür. Yatay kesit bağımlılığını göz önünde tutarak çalışan Bahmani-Oskooee vd. (2014) panel birim kök testinin bireysel sonuçlarına göre; Hırvatistan haricindeki ülkelerin, dış ticaret rekabet gücü noktasında AB14 ülkelerine yakınsadıkları görülmüştür. Panelin geneline ilişkin yapılan analizlerde, serilerdeki ani ve yumuşak yapısal değişimlerin varlığı göz önünde bulundurulduğunda, panele dahil edilen 13 PEGSÜ ülkesinin, dış ticaret rekabet gücü yönünden, AB14 ülkelerine yakınsamakta oldukları görülmüştür. Test yönteminin bu ülkelerdeki ani ve yumuşak yapısal değişimleri başarılı bir şekilde tespit ettiği görülmüştür. Elde edilen bulgular; AB’ye sonradan katılan ve AB adayı olan PEGSÜ ülkelerinin AB mevzuatlarına uyum sürecini başarıyla yürüttüklerini, AB’nin de bu ülkelere yaptığı finansal ve teknik desteklerle ülkelerin dış ticaret rekabet güçlerini artırdığını göstermektedir.
In this globalized world, supply and demand are on the rise, where access to international markets is easier than ever because of the advances in technology. With easier access to markets, countries got into fierce competition involving their companies operating on a global scale. This phenomenon puts companies and thus countries into a competition with no limits. Examining the countries that gained independence after the dissolution of the Soviet Union in 1990 and were described as Transition Economies in the 1994 United Nations Framework Convention on Climate Change will be helpful in determining if they are capable of competing with other countries while also providing them with necessary policy recommendations. Transition economies, particularly those on the European continent, have the potential to compete with European Union (EU) countries in foreign trade owing to their relatively more developed position in terms of economy and their geographical proximity to EU countries.
This study analyzed whether the foreign trade-driven competitive power of the 13 transition economies (i.e., Albania, Bulgaria, Czech Republic, Estonia, Croatia, Latvia, Lithuania, Hungary, Macedonia, Poland, Romania, Slovenia, and Slovakia) converges toward that of the 14 main European Union countries (EU14) for the period of 1993:M01–2021:M08. These countries are either members or candidates for the EU, and their data are entirely accessible. The study used the Fourier panel unit root test with sharp and smooth breaks developed by Bahmani-Oskooee et al. (2014). Foreign trade-driven competitive power can be measured using different indicators. In this study, it was measured based on the real effective exchange rate for relative prices. As part of the analysis, first, the presence of a cross-sectional dependence among transition economies was examined using the tests developed by Breusch and Pagan (1980) LM, Pesaran (2004) LMS, and Baltagi, Feng and Kao (2012) LMBC. A cross-sectional dependence was observed among these countries. Then, the panel unit root test was applied, which was developed by Bahmani-Oskooee et al. (2014), by considering the cross-sectional dependence among countries. According to individual analyses, transition economies, except for Croatia, were found to be in a closer position to EU14 countries in terms of foreign trade-driven competitive power. Considering the presence of sharp and smooth structural breaks in series, other analyses on the overall panel revealed that the 13 transition economies, included in the panel, converge toward EU14 countries in terms of foreign trade-driven competitive power. Moreover, the testing method was able to successfully determine the sharp and smooth structural breaks in these countries. The findings of this study show that transition economies that joined the EU at a later stage or are candidates for the EU have successfully carried out the EU harmonization process. Conversely, the EU is providing financial and technical support to these now-member or candidate countries to increase their production level and foreign trade volume while simultaneously enhancing their foreign trade-driven competitive power.
