Statistical Analysis and Forecasting of Trade Relations between Italy and Georgia

Abstract

The article discusses Georgian-Italian trade relations and empirically realizes the models of Georgian export to Italy and import from Italy to Georgia. Empirical models are based on the commonly used economic theory of the export-import determinants (real exchange rate, nominal exchange rate, total price index, national income). According to the empirical model of import the current value of import (from Italy to Georgia) is positively related to the real exchange rate and the volume of Georgian GDP. Furthermore, the implementation of the empirical model reveals the impact of factors (COVID 19, the impact of the British referendum on the Eurozone, the Italian referendum, etc.) affecting to the economies of countries and trade relations, correspondingly. Empirical model of export presented in the paper is not statistically valid, however, modifying functional specification from additive to multiplicative does not improve statistical characteristics of model. The article forecasts the trade relations between the two countries using the exponential smoothing method. Forecast models indicate an increasing trend in exports and imports between countries.