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Determinants of Kosovo Trade: A Gravity Model Approach

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Peci F., Holzner M., Kutllovci E.
South East European Journal of Economics and Business
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2010
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vol. 5
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issue 2
33-41
EN
This study attempts to identify and quantify the factors affecting bilateral trade flows between Kosovo and its trading partner countries using a gravity model. The econometric model is estimated based on both economic and institutional aspects. The results show that family networking with Kosovo emigrants determines to a large extent both exports and imports, while corruption and informality in the partner country seem not to be issues with regard to Kosovo imports. This comes as a surprise given the initial assumption that Kosovo trades more with countries that have a high share of corruption because of informal networks between small and medium enterprises (SME) predominant in Kosovo. The regional CEFTA free trade agreement has a positive effect on both Kosovo imports and exports. Key words: international trade, gravity model, informality, Kosovo
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