The Impact of CEFTA agreement on its members' export flows

By using a panel dataset of 71 countries over the years 1990-2014, this thesis investigates the impact of Central European Free Trade Agreement (CEFTA) on its members’ export flows. CEFTA Agreement is a multilateral free trade agreement facilitated by the European Union with the objective of helping Central and Eastern European countries integrate further towards the EU. Having been signed firstly by Poland, Hungary, Czech Republic and Slovak Republic in 1992, it is the first free trade agreement after the collapse of the Soviet Union. Later on these countries were joined by Slovenia, Romania, Bulgaria and Croatia. Because most of these countries joined the EU in the mid 2000s, another seven countries signed CEFTA in 2006 and 2007. These countries are Albania, Bosnia-Herzegovina, Kosovo, Macedonia, Montenegro, Moldova and Serbia. Multiple fixed effects estimators are employed to control for unobserved heterogeneity in country-pairs, countries and country-year combinations. We find that CEFTA has had a positive impact on its members’ export flows. For instance, a robustness check is made by using TRADHIST dataset which was acquired from CEPII Institute. According to the estimates obtained by carrying out the same tests with two different datasets, the results that CEFTA has had a positive impact are very robust. Finally, we test a second hypothesis; has CEFTA1992 been more beneficial for its members than CEFTA2006-7? The results are quite ambiguous, but after using country-pair fixed effects on top of country-year fixed effects, we suggest that CEFTA1992 has indeed been more positively impactful.