Trade Collapses and Trade Slowdowns: Evidence from Some Central and Eastern European Countries.

World trade suddenly plummeted in the last quarter of 2008 after the bankruptcy of Lehman brothers and the subsequent meltdown in financial markets. Even if the following recovery was impressive, trade growth is now noticeably below trend. The anaemic momentum in global export volume questionswhether the financial crisis has permanently changed the trade landscape. In this paper, we address trade elasticities in some Central and Eastern European economies by estimating a standard import function equation. We employ a dynamic panel Auto Regressive Distributed Lagmodel with the Common Correlated EffectsMean Group estimator to cope with cross-sectional dependence. Themodel is fit on a sample of eight countries over the period 1995:q1-2017:q1. First, we estimate long-run import elasticities with respect to gdp and the relative import price. Then, we discriminate between booms and slowdowns. Results confirm imports respond differently over the business cycle. [ABSTRACT FROM AUTHOR]