Oil Price Shock and Structural Changes in CMEA Trade

Beckmann, Elisabeth and Fidrmuc, Jarko (1. August 2009): Oil Price Shock and Structural Changes in CMEA Trade. Pouring Oil on Troubled Waters? Discussion Papers in Economics 2009-12

Abstract

We analyse trade between countries of the Council of Mutual Economic Assistance in Eastern Europe between 1950 and 1990. Despite central planning and political motivation of the CMEA, we show that trade could be explained by standard demand factors surprisingly well. Moreover, we document that the oil price crisis had several repercussions on Eastern Europe. The Soviet Union as a supplier of crude oil benefited from the energy crisis in the 1970s. In particular, it used energy exports as an instrument of foreign policy. In turn, the responses of the individual CMEA countries in Central Europe were largely different.

• Item Type: Paper
• Keywords: economic history, free trade areas, political economy, structural break, gravity model, oil price, CMEA trade
• Faculties: Economics; Economics > Munich Discussion Papers in Economics; Economics > Munich Discussion Papers in Economics > International Trade; Economics > Munich Discussion Papers in Economics > Economic History; Economics > Munich Discussion Papers in Economics > Transition Economics
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: F14, C22, N74
• Language: English

References

Anderson, J. E. & van Wincoop, E. (2003) ‘Gravity with gravitas: A solution to the border puzzle’, American Economic Review, 93, pp. 170-192.

Baldwin, R. & Taglioni, D. (2006) ‘Gravity for Dummies and Dummies for Gravity Equations’ Working Paper 12516 (National Bureau for Economic Research).

Balmaceda, M. M. (2004) ‘Der Weg in die Abhängigkeit. Ostmitteleuropa am Energietropf der UdSSR’ osteuropa, 54, 9-10, pp. 162-179.

Ben-David, D. & Papell, D. H. (1997) ‘Structural Change and International Trade’ Discussion Paper No. 1568 (Centre for Economic Policy Research).

Brine, J. (1992) ‘Comecon. The Rise and Fall of an International Socialist Organization’ (International Organization Series. Volume 3, New Brunswick and London, Transaction Publishers).

Dudinskii, I. (1966) ‘Toplivo-syr’evaya problema stran SEV i puti ee resheniya’ Voprosy ekonomiki, April, pp. 84-94.

Fidrmuc, J., Kaufmann, S. & Resch, A. (2008) ‘Structural breaks of Austrian foreign trade with Eastern Europe during the early 1970s’ Econometrica, 35, 5, pp. 465-479.

Hosking, G. (2006a) ‘Rulers and Victims. The Russians in the Soviet Union’ (Belknap Press of Harvard University Press, Cambridge, Massachusetts and London).

Hosking, G. (2006b) ‘Trust and Distrust: A Suitable Theme for Historians?’ Transactions of the Royal Historical Society, 16, pp. 95-115.

IMF, The World Bank, OECD & EBRD (1991) ‘A Study of the Soviet Economy’, (volume 3, International Monetary Fund, Paris).

International Arts and Sciences Pr. (1974) ‘Soviet Statutes and Decisions. A Journal of Translation: Socialist International Organizations: COMECON’, 9,1.

Korhonen, I. & Ledyaeva, S. (2008) Trade Linkages and Macroeconomic Effects of the Price of Oil, Discussion Paper 16 (Helsinki: Bank of Finland, BOFIT, Institute for Economies in Transition).

Kosygin, A. N. (1980) ‘Vystuplenie glavy delegatsii Soyuza Sovetskikh Sotsialisticheskikh Respublik tovarishcha A. N. Kosygina’ Ekonomicheskoe sotrudnichestvo stran-chlenov SEV, 4, pp. 28-32.

Kramer, J. M. (1990) ‘The Energy Gap in Eastern Europe’ (Lexington Books, Toronto).

Lavigne, M. (1984) ‘The Soviet Union inside Comecon’ Soviet Studies, 35, 1, pp. 135-53.

Maddison, A. (2003) ‘The World Economy: Historical Statistics’ (OECD, Paris).

Marer, P., Arvay, J., O’Connor, J., Schrenk, M. & Swanson, D. (1992) Historically Planned Economies. A Guide to the Data (International Bank for Reconstruction and Development / The World Bank, Washington, D.C.).

Marer, P. (1972) ‘Soviet and East European Foreign Trade, 1946-1969. Statistical Compendium and Guide’ (Indiana University Press, Bloomington and London).

Marrese, M. & Vanous, J. (1983) ‘Soviet Subsidisation of Trade with Eastern Europe: A Soviet Perspective’ (Institute of International Studies, University of California, Berkeley).

Metcalf, L. K. (1997) ‘The Council for Mutual Economic Assistance. The Failure of Reform’ (Columbia University Press, New York).

Radio Free Europe (1975) ‘Radio Tirana: Broadcast of 25 February 1975’, Polish Press Survey No. 2472, p. 5.

Richter, S. (1994) ‘Life Without CMEA: Foreign Trade in Eastern and Central Europe’, in: Gács, J. & Winckler, G. (eds.) ‘International Trade and Restructuring in Eastern Europe’ (Contributions to Economics, Physica-Verlag, Heidelberg) pp. 183-210. Service, R. (2003) ‘A History of Modern Russia. From Nicholas II to Putin’ (Penguin, London).

Smith, A. (1993) ‘Russia and the World Economy. Problems of Integration’ (Routledge, London and New York).

Smith, A. (1983) ‘The Planned Economies of Eastern Europe’ (Croom Helm, London).

Stijns, J.-P. (2003) ‘An Empirical Test of the Dutch Disease Hypothesis Using a Gravity Model of Trade’, available at: http://129.3.20.41/eps/it/papers/0305/0305001.pdf, last accessed 21 June 2009.

Stone, R. W. (1996) ‘Satellites and Commissars. Strategy and Conflict in the Politics of the Soviet-Bloc Trade’ (Princeton University Press, Princeton, New Jersey).

Trzeciakowski, W. (1987) ‘Impact of External Market Fluctuations on Centrally Planned and Market Economies: A Systematic Comparative Approach’, in: Pasinetti, L. & Lloyd, P. ‘Structural Change, Economic Interdependence and World Development. Proceedings of the Seventh World Congress of the International Economic Association’ (volume 3, Basingstoke, Macmillan), pp. 465-477.

Zwass, Adam (1989) ‘The Council for Mutual Economic Assistance. The Thorny Path from Political to Economic Integration’ (Armonk and Sharpe, New York and London).