FOREIGN TRADE AS A DETERMINANT OF ECONOMIC GROWTH OF THE REPUBLIC OF SRPSKA: AN EMPIRICAL ANALYSIS

Abstract

Most studies that investigate the relationship between foreign trade and economic growth analyze it through the interpretation of various indicators. This paper seeks to investigate the relationship between coverage of imports by exports and the openness to foreign trade on one hand and the gross domestic product of the Republic of Srpska on other hand. The research relates to the period from 2001 to 2020. By applying the ARDL model we confirmed the initial hypothesis that an increase in the coverage of imports by exports increases the domestic product. The paper confirms the long-term relationship between independent and dependent variables, expressed through the existence of the cointegration equation. Results based on the applied ARDL method show negative, but insignificant relationship between openness and gross domestic product in the Republic of Srpska in long run, and statistically significant positive relationship between coverage of imports by exports and gross domestic product in long run. Value of coefficient shows that 1% increase in coverage of imports by exports increases gross domestic product by 0.80% in long run.