Determinants of trade flows between eastern and western Europe: the influence of the institutional quality.

Abstract

This paper analyses which factors determine the trade levels between the Central and East European countries with the Western Europe economies. For this purpose, we perform an econometric study in the period 1995-2015 using a gravity model approach in which we consider institutional quality indicators. The results show that the trade between these two groups of countries is in part determined by the size of their economies and the distance between them. Moreover, the results reveal that the improvements in the institutional framework of the Central and East European countries increase the bilateral trade flows with Western Europe.