An Examination of the Causality Between Export, Import and Economic Growth of Kosovo Using Quarterly Data From 2010 to 2021

Abstract

The aim of this paper is to examine the nexus between exports, imports, and economic growth for the Kosovo’s economy in the period 2010-2021. Unit root tests were used to test the stationarity condition. The ADF, P-P and KPSS tests showed that the three variables are stationary in the first difference. The Johansen cointegration test showed that these variables are cointegrated in the short run. The lag length was set to five based on three criteria. The proposed model was free of serial autocorrelation and heteroskedasticity. Granger causality results based on Vector Autoregression showed that there is a bidirectional causality relationship between exports and economic growth. There is no causality between imports and economic growth. However, there is unidirectional causality from economic growth to imports and unidirectional causality from exports to imports. This study supports the ELG theory, i.e., exports are an important driver of economic growth.