Bilateral Trade and SEE–Eurozone Countries Growth Rate Alignment

The aim of the paper is to explore the role of trade in aligning the synchronisation patterns between the South Eastern European (see) countries – Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR of Macedonia, Kosovo, Montenegro, Romania and Serbia – and members of the euro area. More precisely, we investigate whether bilateral trade flows affect output synchronisation between the euro area countries and see countries and compare trade-synchronisation patterns between the see countries and new member states that have not yet introduced the euro (NMS). The results show that the levels of output similarities between the see countries and NMS are different and that the see countries exhibit lower output correlation with the euro area members than the NMS. Exploring the role of trade in aligning growth patterns has in some cases found positive effects, much stronger for the see countries, which have lower trade intensity levels. We argue that the reason for these results is related to the fact that other factors could be dominant in the NMS countries (policy measures alignment within the EU), while for the see countries only trade relationships had the opportunity to exert noticeable effects in the analysed period.