IMPLICATION OF THE EXCHANGE RATE VOLATILITY ON THE TRADE BALANCE OF ALBANIA

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Published: 2017-03-07

Page: 130-139


SAFET KURTOVIC *

Faculty of Management and Business Economics, University of Travnik, Aleja Konzula 5, Travnik, 72 270, Bosnia and Herzegovina.

BLERIM HALILI

Department of Economics, College “Biznesi”, 29 Motrat Qiriazi, 10 000, Kosovo.

NEHAT MAXHUNI

Department of Economics, College “Biznesi”, 29 Motrat Qiriazi, 10 000, Kosovo.

*Author to whom correspondence should be addressed.


Abstract

The paper intends to investigate 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 co-integration approach, vector error correction model (VECM) and impulse response were used for empirical analysis. The results of the study show that there exists a long-term cointegration between REER and TB. Specifically, REER depreciation positively affects the trade balance of Albania in both the long-term and short-run indicating the weak presence of the J-curve effect. Important recommendations were derived from the results.

Keywords: J-curve, cointegration, elasticity, short-term effect, long-term effect


How to Cite

KURTOVIC, S., HALILI, B., & MAXHUNI, N. (2017). IMPLICATION OF THE EXCHANGE RATE VOLATILITY ON THE TRADE BALANCE OF ALBANIA. Journal of Global Economics, Management and Business Research, 8(3), 130–139. Retrieved from https://ikprress.org/index.php/JGEMBR/article/view/3303

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