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

Authors

  • Safet Kurtovic University of Travnik
  • Sead Talovic Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina
  • Blerim Halili College Pjeter Budi Pristina, Kosovo
  • Nehat Maxhuni College “Biznesi” Pristina, Kosovo

DOI:

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

Keywords:

Trade agreements - Liberalization, Trade, Export, Import, Trade balance

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.

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Published

2016-06-24

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