European Union and Trade Flows: The Case of Lithuania

Sammanfattning: This paper examines the impact of EU integration on Lithuania's direction of trade flows. Using a gravity model and bilateral trade data from 1995 to 2020, the study aims to understand changes in trade flows after joining the EU and provide practical implications for policymakers, businesses, and investors. The findings show that EU membership has positively influenced Lithuania's trade flows. The country experienced a realignment of trading partners and increased trade volumes after joining the union. However, this thesis also shows that the EU is not the only factor affecting trade. The core variables of the gravity model consisting of distance and GDP have a significant impact on determining the direction of trade flows. Other factors such as ties with former Soviet Union members also have a significant impact although this impact has diminished over time.