Sustainability of Merchandise Trade Flows between Croatia and Other EU Member States - Panel Cointegration Approach

This research examined the sustainability of merchandise trade flows between Croatia and other EU member states. Merchandise exports and imports were disaggregated into bilateral merchandise trade flows between Croatia and nineteen European Union 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 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-a-vis her nineteen European Union trading partners. Key words: Merchandise trade, Panel cointegration, Croatia, EU JEL: C33, F14, F43.