Modeling convergence of Ukraine towards the EU

Abstract

This article studies the pre-accession experience of new European Union member states of Central and Eastern Europe and accordingly examines the prospects for a convergence of Ukraine’s economic performance with that of the EU countries. The authors develop econometric models to evaluate the trade and foreign direct investment (FDI) effects of EU-accession for Ukraine. The trade potential between Ukraine and the EU is assessed based on the gravity model of international trade using economic distance indexes. The FDI effects are analyzed according to an econometric data panel model. The article also examines the benchmarks of Ukraine’s convergence with the EU in terms of trade volume and FDI potential values.

Keywords

• Regional integration effects
• trade effects
• FDI effects
• economic distance
• gravity model of trade
• convergence