Economic Growth and Openness in Transition: A Study of Western Balkans

Abstract

More than two decades have passed since the collapse of communist regimes that ruled in all of the Western Balkan countries. The list of these countries includes the Republic of Albania and all countries that were part of the Former Yugoslavian Republic, except Slovenia. Only one of these countries, Croatian, reached the goal of integration to European Union. Other countries are still in their late transition journeys which aim membership to EU. This study aims to investigate the link between openness and economic growth in the Western Balkan Countries currently in transition. While the common sense indicates that openness impacts positively in the economic growth, many theoretical and empirical studies cannot fully reject or approve this statement. Even though that the majority of these studies advocate positive impact of openness in economic growth, many other prominent studies have found the opposite result or that there exist no link between these two indicators. Data set used in the empirical analysis is a panel data set for the period 2005 to 2013 from three important countries: the Republic of Albania, the Former Yugoslavian Republic of Macedonia and the Republic of Serbia. While applying a multi regression model with dependent variable the Gross Domestic Product Quarterly Growth Rate and as dependent variables the current and previous quarterly percentage change of trade volume. The main result of this study is that the openness has a significant positive impact into the economic growth of Western Balkan countries in transition.

DOI: 10.5901/mjss.2015.v4n1p423