The Effect of Trade Openness on Economic Growth: The Albanian case

Abstract

The main purpose of this study is to evaluate and determine the effects of trade liberalization on the economic growth in Albania. The factors included in this project are, Foreign Direct Investment (FDI), Exchange Rate (ER), and Trade openness. Trade openness was computed as the ratio of total of imports and exports to total exports. The methodology comprises the use of the above mentioned macroeconomics indicators data which are all gathered by official institution database for an interval time of ten years measured in quarterly bases. Secondly, the Johansen co-integration method is implemented in order to understand the impact and relationship of trade openness with economic growth (GDP). Finally based on the result of the analysis the trade openness and the factors deriving from it have positive impact on economic growth.