Measuring the economic impact on Montenegro of establishing a customs union with Serbia
Measuring the economic impact on Montenegro of establishing a customs union with Serbia

Summary/Abstract: Bearing in mind all the problems of previous analyses and measurements, it seems worthwhile to develop an appropriate analytical framework for the analysis and measurement of the welfare effects on Montenegro of establishing a customs union with Serbia. This is the main purpose of this article. This structure, of course, will be based on a classical ‘trade creation – trade diversion’ framework. This time, we will not try to carry out any comprehensive or detailed measurement of those effects, because this would require much more time and effort: in order to be properly performed, such a measurement should be carried out on a product-by-product basis; it would, therefore, require much data that are, very often, not even available. Nevertheless, we will try, on the basis of the available evidence, at least to get an idea of the general nature and the magnitude of these effects. We will not try to obtain an answer to another interesting, but much more complicated, question: is it better for Montenegro to join such a customs union or to be independent? However, the framework developed here would also be appropriate for such an analysis and estimation.

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