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

Kurtović Safet (), Halili Blerim () and Maxhuni Nehat ()
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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

Naše gospodarstvo/Our economy, 2017, vol. 63, issue 3, 27-36

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.

Keywords: J-curve; cointegration; elasticity; short-term effect; long-term effect (search for similar items in EconPapers)
JEL-codes: F14 F31 F32 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ngooec:v:63:y:2017:i:3:p:27-36:n:4

DOI: 10.1515/ngoe-2017-0016

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