Western Balkan’s trade with the EU and CEFTA-2006: Evidence from Macedonian data

The objective of this paper is to empirically examine the determinants of bilateral trade of Macedonia, with particular emphasis on the trade with the EU and CEFTA-2006 countries. The standard Gravity model is used to measure the determinants of the bilateral trade in a panel framework. Results suggest that Macedonian GDP per capita and foreign GDP per capita play significant role in explaining bilateral trade. When Macedonian trade with EU is investigated only, then domestic income has larger magnitude than compared to the entire sample. Importantly, no additional gains have been approximated from FTAs and from CEFTA-2006, in particular. Potential explanation of this can be the still existent non-tariff barriers across the SEE countries, in terms of the technical, sanitary and phyto-sanitary barriers to trade, the time and costs to export and import, improvement of infrastructure related to trade and so on.