International trade flows of the Balkan states

Abstract

International economic relations are immensely important for small economies, such as the countries of the Western Balkans (WBC). The importance of economic relations is a key link in the overall economic growth and development, especially in international trade in goods. This paper analyses international trade flows of the WBC and the EU using the gravity panel data model in the period from 2006 to 2020. The research aims to assess the international trade flows between the Balkan countries and the EU, bearing in mind that they conduct the largest volume of trade with the EU member states. Simultaneously, this approach will enable a clearer view of the economic relations of candidate countries during the EU negotiation process for potential membership. The results indicate that the highest volume of trade is achieved with wealthy economies, measured by the development of the economy and the size of the market measured by the number of inhabitants, while the lowest volume of trade is achieved with distant economies. The use of the gravity model in its basic form provides satisfactory model estimates, while the extended model provides additional information on mutual commodity flows with additional variables and dummy variables in the model.

Keywords

• international trade
• gravity panel data model
• western balkans
• eu