Trade creation and trade diversion in the Black Sea Economic Cooperation area: a gravity approach

Abstract

This thesis considers the performance of one of the pioneer examples of the new form of regional arrangements, namely the Black Sea Economic Cooperation Organization starting from its establishment and from an international trade theory perspective and with reference to trade creation and trade diversion effects. To do this, a simple gravity model is used where the exports of country i to country] depend on the GDP’s of the exporting and the importing countries and the distance between the capitals. The estimates from the models are used to calculate External Trade Creation, and Gross Trade Creation effects measuring the impact of BSEC on trade flows in the region.