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An empirical analysis of the trade balance in postcommunist Albania

Listed author(s):
  • Genci Gjanci

    ()

    (Department of Finance and Accounting, Faculty of Economy, Fan S. Noli University, Korce, Albania)

  • Ardian Cerava

    ()

    (Department of Horticulture and Agribusiness, Faculty of Agriculture, Fan S. Noli University, Korce, Albania)

Registered author(s):

    In this study we empirically analyze the relationship between real exports and real imports during the postcommunist transition in Albania. The country liberalized its trade in the early 1990s after the fall of communism and has seen its trade deficit increase since then. The continuous deterioration of the country's trade balance can create serious problems for its economy. We employ the ARDL bounds testing approach to a transformed equation derived from the Husted's (1992) model of inter-temporal budget constraint. The data used are annual observations from 1992 to 2012 obtained from the World Development Indicators 2013. Results show that a long term relationship exists between real exports and real imports. In addition, we find that imports grow faster than exports and the country's trade deficit is likely to increase with the increase of imports. More specifically, a 10 percents increase of real imports is accompanied by a 9.61 percents increase of real exports. The rising trade deficit should be a cause of concern for the country's policymakers. They should try to adopt effective export promoting policies as such policies would be particularly suitable in reducing the trade deficit in Albania.

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    File URL: http://reaser.eu/RePec/rse/wpaper/R7_4_Gjanci_Cerava_p33-42.pdf
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    Article provided by Pro Global Science Association in its journal Published in Review of Applied Socio-Economic Research.

    Volume (Year): 7 (2014)
    Issue (Month): 1 (June)
    Pages: 33-42

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    Handle: RePEc:rse:wpaper:v:7:y:2014:i:1:p:33-42
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    1. Tuck Cheong Tang, 2006. "Are Imports And Exports In The Oic Member Countries Cointegrated? A Reexamination," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 14(1), pages 49-79, December.
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    5. Verma, Reetu & Perera, Nelson, 2008. "An Empirical Analysis of Sustainability of Trade Deficit:Evidence from Sri Lanka," Economics Working Papers wp08-06, School of Economics, University of Wollongong, NSW, Australia.
    6. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
    7. Charalambos Pattichis, 1999. "Price and income elasticities of disaggregated import demand: results from UECMs and an application," Applied Economics, Taylor & Francis Journals, vol. 31(9), pages 1061-1071.
    8. PERERA, Nelson & VARMA, Reetu, 2008. "An Empirical Analysis Of Sustainability Of Trade Deficit: Evidence From Sri Lanka," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(1), pages 79-92.
    9. KONYA, Laszlo & SINGH, Jai Pal, 2008. "Are Indian Exports And Imports Cointegrated?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(2), pages 177-186.
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