Trade Gravity, Diversification and Correlation Relationship Between Albania and Balkans’ Countries


Abstract Foreign trade developments constitute an important component of the overall economic development in general and in the external sector, in particular. Foreign trade is particularly critical to the economies of small dimensions as our country. In the economic field, trade liberalization has become one of the key instruments to promote regional cooperation in South East Europe (SEE). This paper makes an assessment of Albania’s trade flows to its main partners in the SEE region and the European Union (EU) using the gravity model. Gravity models are transformed into models used to assess the bilateral trade between the countries. Results of the model suggest the main factors that affect trade flows between Albania and its trading partners in the region and the EU. These findings are consistent with other studies in this field.
Keywords gravity trade, trade liberalization, free trade agreement, correlation, trade flow
JEL Classification C23, C13, F10
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