Trade integration and trade imbalances in the European Union: a network perspective

Gautier M. Krings (), Jean-François Carpantier, Jean-Charles dELVENNE () and ,
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Gautier M. Krings: Université catholique de Louvain, ICTEAM, Belgium; Real Impact Analytics Belgium
Jean-Charles dELVENNE: Université catholique de Louvain, ICTEAM and CORE, Belgium

No 2013056, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We study the ever more integrated and ever more unbalanced trade relationships between European countries. To better capture the complexity of economic networks, we propose two global measures that assess the trade integration and the trade imbalances of the European countries. These measures are the network (or indirect) counterparts to traditional (or direct) measures such as the trade-to-GDP (Gross Domestic Product) and trade deficit-to-GDP ratios. Our indirect tools account for the European inter-country trade structure and follow (i) a decomposition of the global trade flow into elementary flows that highlight the long-range dependencies between exporting and importing economies and (ii) the commute-time distance for trade integration, which measures the impact of a perturbation in the economy of a country on another country, possibly through intermediate partners by domino effect. Our application addresses the impact of the launch of the Euro. We find that the indirect imbalance measures better identify the countries ultimately bearing deficits and surpluses, by neutralizing the impact of trade transit countries, such as the Netherlands. Among others, we find that ultimate surpluses of Germany are quite concentrated in only three partners. We also show that for some countries, the direct and indirect measures of trade integration diverge, thereby revealing that these countries (e.g. Greece and Portugal) trade to a smaller extent with countries considered as central in the European Union network.

Keywords: trade network; integration; Euro; Rose effect; flow decomposition; commute-time distance (search for similar items in EconPapers)
JEL-codes: C45 F14 F15 F32 (search for similar items in EconPapers)
Date: 2013-11-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://sites.uclouvain.be/core/publications/coredp/coredp2013.html (application/pdf)

Related works:
Journal Article: Trade Integration and Trade Imbalances in the European Union: A Network Perspective (2014)
Working Paper: Trade integration and trade imbalances in the European Union: a network perspective (2014)
Working Paper: Trade integration and trade imbalances in the European Union: a network perspective (2013)
Working Paper: Trade integration and trade imbalances in the European Union: a network pespective (2013)
Working Paper: Trade integration and trade imbalances in the European Union: a network perspective (2013)
Working Paper: Trade integration and trade imbalances in the European Union: a network perspective (2013)
Working Paper: Trade integration and trade imbalances in the European Union: a network pespective (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2013056

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