Analyzing the relationship between trade openess and economic growth in North Macedonia: a SVAR approach
Journal
Proceedings of the Faculty of Economics in East Sarajevo
Date Issued
2024
Author(s)
DOI
10.7251/ZREFIS2429023S
Abstract
The relationship between trade openness
and economic growth is complex. We employ a
structural vector auto-regression (SVAR) model using
quarterly data for the period from 2005 to 2022 to
estimate the impact of trade openness on the
economic growth in North Macedonia. The study's
findings
indicate a negative and significant
relationship between trade openness and economic
development in the short and long run. The
complexity of this relationship highlights an adverse
impact on countries specialising in low-quality
production or those with low levels of human capital
accumulation, such as North Macedonia. The
dynamic effects of shocks to trade openness on
interest rates, consumer price index, interest rates,
labour force, and exchange rate are investigated
using impulse response functions. The paper suggests
that North Macedonia's trade strategy requires
reorientation towards trade diversification, attracting
export-oriented FDIs, and fostering regional trade
integration to achieve sustainable economic growth
and development.
and economic growth is complex. We employ a
structural vector auto-regression (SVAR) model using
quarterly data for the period from 2005 to 2022 to
estimate the impact of trade openness on the
economic growth in North Macedonia. The study's
findings
indicate a negative and significant
relationship between trade openness and economic
development in the short and long run. The
complexity of this relationship highlights an adverse
impact on countries specialising in low-quality
production or those with low levels of human capital
accumulation, such as North Macedonia. The
dynamic effects of shocks to trade openness on
interest rates, consumer price index, interest rates,
labour force, and exchange rate are investigated
using impulse response functions. The paper suggests
that North Macedonia's trade strategy requires
reorientation towards trade diversification, attracting
export-oriented FDIs, and fostering regional trade
integration to achieve sustainable economic growth
and development.
Subjects
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