Relationship between exchange rate and trade balance during the period 2002-2023 in Albania - Economicus

By, Dr. Leonard BODURI, Prof. Asoc. Dr. Ermela KRIPA

Abstract
Purpose: The main objective of this paper is to empirically identify the impact of exchange rate volatility on the trade balance in Albania. This paper analyzes the relationship that exists between the trade balance and the exchange rate. In addition, other macroeconomic factors with an impact on the trade balance are analyzed, such as economic growth, the basic interest rate, foreign direct investments and remittances. Methodology: The method used is the empirical method in presenting data and the performance of macroeconomic factors and the econometric method to study the relationship between the exchange rate and the trade balance. The study uses data obtained from INSTAT, the World Bank and other sources for the period 2002- 2023. To estimate the regression results and estimation procedures for time series parameters, the VAR Model is used, using data on the trade balance, the euro/lek exchange rate, foreign direct investments, economic growth and remittances. Findings: The results of this study show that there is a weak relationship between the exchange rate and the trade balance. Value: Also, the paper contributes to the existing literature on the relationship between exchange rate and trade balance during the period 2002-2023 in Albania. The findings can be used by businesses and stakeholders as a tool that helps them make the necessary assessments regarding the risks of the exchange rate and the impact on their businesses.
Keywords: exchange rate, trade balance, FDI, remittances, VAR model.

https://doi.org/10.58944/teta1402