Relationship between Albania and Turkey after Free Trade Agreement

Abstract

The purpose of this paper is to analyze the trade of Albania toward a larger country such as Turkey and to observe how the trade volume has changed after the Free Trade Agreement. A multiple regression model is used to calculate the overall impact of trade. The dependent variable is GDP and the independent variables are total imports and exports in Albania. Data are obtained mostly from the Institute of Statistics (INSTAT) and Turkish Statistical Institute (TÜİK). The Albanian GDP has been derived from yearly data in order to match the model, during the period of 1990 to 2013. To have a closer view on the significance of trade and compare the periods before and after Free Trade agreement, the data are obtained monthly from 1996M1 to 2015M3. Imports and Exports resulted to have a strong relationship with GDP, therefore proving the economic theory that trade has a direct impact over the economy of the country. Regarding the trade volume between Albania and Turkey, there seemed to be more imports entering in Albania, rather than exports. As expected, the results show once more that after 2006 the overall trade in Albania has increased and along with it the trade between Albania and Turkey has increased too.