Export dependence and the economic crisis in the West Balkans Online publication date: Thu, 30-Sep-2010
by Milena Jovicic
International Journal of Sustainable Economy (IJSE), Vol. 2, No. 4, 2010
Abstract: The global economic crisis showed effects in the West Balkans in the second half of 2008, multiplying the already existing economic problems. To investigate the relationship between the domestic economic activities and the economic dependence of these countries on foreign economic relations, we observe the main economic indicators assessing their trend breakpoints. Then, by use of vector autoregression (VAR) modelling, we test causality in chain of events between domestic industrial production and exports. The tested hypotheses are the following: (1) the more closely a country is connected in trade with other (more developed) countries, the sooner it experiences the crises and (2) the harder are the effects. The results of our econometric analysis give evidence in favour of the first assumption, while for the intensity of the crisis the opposite seems to be true: countries less open to foreign trade seem to demonstrate a larger production decrease.
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