DP2641 Disintegration and Trade
The gravity model of trade is utilized to assess the impact of disintegration on trade. The analysis is based on three recent disintegration episodes involving the former Soviet Union, Yugoslavia and Czechoslovakia. The results point to a very strong home bias around the time of disintegration, with intra-union trade exceeding normal trade approximately 43 times in the former Soviet Union and Czechoslovakia, and 24 times in the former Yugoslavia. Disintegration was followed by a sharp fall in trade intensity. Nevertheless, there is a considerable hysteresis in economic relations, with trade flows among the former constituent Republics still between two and 30 times greater than normal trade in 1998.