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

Safet Kurtovic, Sead Talovic, Blerim Halili, Nehat Maxhuni

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

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DOI: https://doi.org/10.14665/1614-4007-23-1-003

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