Liberalization of Trade with the EFTA Countries: Some Evidence from Bosnia and Herzegovina

Safet Kurtovic (), Sead Talovic (), Blerim Halili () and Nehat Maxhuni ()

Journal Transition Studies Review, 2016, vol. 23, issue 1, 21-35

Abstract: This paper's main objective is to study the effect of the liberalization of trade with EFTA countries on trade balance of B&H. It analyzes the time series data for the period 2005 – 2014. Our theoretical framework includes the gravity model and the econometric technique system of simultaneous equations: Three-Stage Least Squares. The research results show that the liberalization of trade with the EFTA countries has led to an increase of trade flows; however, it has not resulted in a significant convergence in exports and imports i.e. in an equable trade balance. We have concluded that the increase in export from B&H to the EFTA countries is positively affected by the consumer price index, population, signed bilateral agreements and geographical distance between the EFTA countries, while the reduction in import of products to B&H is positively affected by signed bilateral agreements with the EFTA countries. Finally, we have found that the reduction in B&H trade deficit is positively affected by reduced gross domestic product (GDP) of B&H. In the case of other analyzed independent variables affecting trade balance, no positive effects have been registered.

Keywords: Trade agreements - Liberalization; Trade; Export; Import; Trade balance (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ase:jtsrta:v:23:y:2016:i:1:p:21-35:id:117

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