Influence of Trade and Institutions on Economic Growth in Transitional Economies: Evidences from Countries from Central and Eastern Europe and Western Balkans

Abstract

The importance of institutions and free trade for economic growth is widely acknowledged in recent economic literature. In this paper we are focused on determining the fractional effects of changes of institutions and trade on economic growth as dependent variable. The analysis includes selected transitional economies from Central and Eastern Europe and Western Balkans. In order to estimate the effect on the institutions and trade on growth rates we develop an ordinary least squares (OLS) panel regression model. The model examines 16 cross section units (countries) in the period 2000-2016. The novelty of our work is that this is the first organized effort to inspect the importance of institutions and trade on economic prosperity in this specific geographic area. Cross-country log-log regressions models demonstrate that both institutions and trade are statistically significant determinants the gross domestic product per capita in the selected economies.