Intra-industry trade and economic distance : causality tests using panel data

In this paper, we implement Granger causalty tests using panel data as methodology perfected by Hurlin (2004, 2005) and Hurlin and Venet(2004). We consider the bilateral trade patterns of the European Union with 17 countries over the period 1976-2000. We show that for the whole sample, there are no-causal relationship whatever the lag considered. However, we find some causal relationship from the economic distance to the share of intra-industry trade in the sub-sample of emerging countries and the inverse relationship in the sub-sample of developing countries.