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Empirical Analysis of Trade Balance in Post-Communist Albania

This study examines Albania's trade balance dynamics post-communism, focusing on the growing trade deficit and its policy implications. Using recent data and econometric models, it finds a strong positive long-term relation between exports and imports, suggesting that policies promoting competitiveness are vital. The research contributes to the limited empirical studies on Albania's trade balance, providing valuable insights for scholars and policymakers.

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Empirical Analysis of Trade Balance in Post-Communist Albania

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  1. An empirical analysis of the trade balance in the post-communist Albania Genci Gjanҫi, Ardian Ҫërava

  2. Introduction • Trade balance reflects a country’s competitiveness in the world markets • Albania experiencing a growing trade deficit since 1992

  3. Introduction… • Few empirical studies on this topic for Albania. • Albania’s competitiveness a central issue of concern among scholars and policymakers. • Trade balance study ⇒ important policy implications

  4. Introduction… • We try to provide additional evidence on the relationship between exports and imports in Albania using more recent data that cover a longer period of time than those used by Çil Yavuz and Kiran (2012). • To our knowledge it is the only study that analyzes this relationship in Albania.

  5. Model and Data • Husted’s (1992 lnexpot - natural logarithm of the exports of goods and services in constant 2005 USD, lnimpot - natural logarithm of the imports of goods and services in constant 2005 USD, t - time α - constant term ε is the white noise error term.

  6. Nature of time series variables • 4 unit root tests • Augmented Dickey-Fuller (ADF) • Phillips-Perron (PP) • Kwiatkowski-Phillips-Schmidt-Shin (KPSS) • Dickey-Fuller Generalized Least Squares (DF-GLS.) • Unit root test results ⇒ both, lnexpot and lnimpot are I(1)

  7. Cointegration method • ARDL • good small sample properties • addresses omitted variable bias

  8. ARDL model • Our basic econometric model in the ARDL form: DUM - crisis dummy

  9. Model diagnostic tests • Several Model Diagnostic Tests • AR √ • JB √ • ARCH √ • RESET √ • CUSUM √ • CUSUM of Squares √

  10. Estimation results • statistically significant coefficients @ 1% and 5%.

  11. Cointegration check • Wald test • Computed F-statistic vs. critical values F-statistic by Narayan (2005)

  12. Results • Cointegration • A 10% increase of imports of goods and services accompanied with a 9.61% increase of exports of goods and services in Albania. • long-run coefficient is significantly smaller than one

  13. Conclusions • strong positive long-term relation between real exports and real imports in Albania • imports grow faster than exports ⇒ trade imbalance grows • Solution: policies that promote the country’s exports by increasing its competitiveness

  14. Thank you acerava@gmail.com

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