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Sustainability of merchandise trade flows between Croatia and other EU member states: Panel cointegration approach

Bošnjak Mile (Risk management and control Department, SKDD - CCP Smart Clear Inc., Zagreb, Croatia)
Bilas Vlatka (University of Zagreb, Faculty of Economics and Business, Department of International Economics, Zagreb, Croatia)
Novak Ivan (University of Zagreb, Faculty of Economics and Business, Department of International Economics, Zagreb, Croatia)

This research examined the sustainability of merchandise trade flows between Croatia and other European Union (EU) member states. Merchandise exports and imports were disaggregated into bilateral merchandise trade flows between Croatia and nineteen EU trading partners for the period 1999-2014. Following Granger-causality and cointegration tests for panel data, we specified the model to be estimated. Using a pooled mean group (PMG) estimator for dynamic heterogeneous panel data, the relationship between Croatian merchandise export and import was assessed empirically. Research results revealed unsustainable Croatian merchandise exports and imports vis-à-vis nineteen EU partners.

Keywords: merchandise trade, panel cointegration, Croatia, EU