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Determinants of the Exports of Hungary: Trade Theory and the Gravity Model

László Erdey () and Andrea Pöstényi ()
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László Erdey: Department of World Economy and International Relations, Faculty of Economics and Business, University of Debrecen
Andrea Pöstényi: ExxonMobil, Hungary

Acta Oeconomica, 2017, vol. 67, issue 1, 77-97

Abstract: The end of the Communist regime brought about great changes in the economies of Central and Eastern Europe; the restructuring of foreign trade was one of the biggest challenges for these countries. After the transition period, Hungary became a very open country, with its trade to GDP ratio around 1.5, while trading with more than 190 countries. The aim of this paper is to analyse the determinants of exports between 1993–2014, with an emphasis on the impact of factor endowments. According to our results, economic size, common border, and free trade agreements had a statistically significant positive effect on exports, while the coefficient of distance had the expected negative sign. We measured factor endowments with several approaches and our results show that exports change in line with the Linder hypothesis, i.e. Hungary tends to trade more with countries having similar factor endowments, and thus its trade is based on differentiated products.

Keywords: factor endowments; Heckscher-Ohlin model; Linder hypothesis; gravity model (search for similar items in EconPapers)
JEL-codes: F11 F14 (search for similar items in EconPapers)
Date: 2017
Note: The present paper is a significantly revised version in its empirical approach of our previous paper presented at the SSEM EuroConference, Budapest, July 6–8, 2014. The recommendations of the two anonymous referees are highly appreciated.
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Handle: RePEc:aka:aoecon:v:67:y:2017:i:1:p:77-97