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Effect of Depreciation of the Exchange Rate on the Trade Balance of Albania

Author

Listed:
  • Kurtović Safet

    (University of Travnik, Faculty of Management and Business Economics, Bosnia and Herzegovina)

  • Halili Blerim

    (College “Biznesi”, Department of Economics, R. Kosovo)

  • Maxhuni Nehat

    (College “Biznesi”, Department of Economics, R. Kosovo)

Abstract

The paper investigates the effect of the real effective exchange rate depreciation of the lek on the trade balance of Albania using quarterly data from 1994 to 2015. Bounds testing cointegration approach, vector error correction model (VECM), and impulse response were used for the empirical analysis. The results of the study show a long-term cointegration between the real effective exchange rate (REER) and the trade balance (TB). Specifically, the REER depreciation positively affects the trade balance of Albania in both the long and short run, indicating the weak presence of the J-curve effect. Important recommendations were derived from the results.

Suggested Citation

  • Kurtović Safet & Halili Blerim & Maxhuni Nehat, 2017. "Effect of Depreciation of the Exchange Rate on the Trade Balance of Albania," Naše gospodarstvo/Our economy, Sciendo, vol. 63(3), pages 27-36, September.
    • Handle: RePEc:vrs:ngooec:v:63:y:2017:i:3:p:27-36:n:4
    DOI: 10.1515/ngoe-2017-0016
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    References listed on IDEAS

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    More about this item

    Keywords

    J-curve; cointegration; elasticity; short-term effect; long-term effect;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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