Liberalization of Trade with the EFTA Countries: Some Evidence from Bosnia and Herzegovina
DOI:
https://doi.org/10.14665/1614-4007-23-1-003Keywords:
Trade agreements - Liberalization, Trade, Export, Import, Trade balanceAbstract
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.
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