INTERDEPENDENCE OF FOREIGN TRADE AND THE ECONOMIC GROWTH OF SERBIA

Abstract

From the 1990s to this day, taking into account the increasing volume of international trade around the world, a large number of studies have emerged with the relationship between economic growth and foreign trade as their research subject. Most of these studies have shown that trade liberalization positively correlates with economic growth and productivity growth in developing countries. The aim of this research is to determine the interdependence between the changes of the gross domestic product and the foreign trade of Serbia in the period from 2000 to 2019. A vector autoregressive (VAR) econometric model and a vector model with error correction (VECM) were used in the research. Additionally, the paper tested the causality between the observed variables, performed an innovative analysis, together with an analysis of the variance decomposition. The results of the research showed the existence of a long-term connection between the changes in the share of imports and exports in the GDP and the development of the GDP in Serbia. In the long run, the share of imports correlates negatively with the GDP, while the share of exports positively correlates with GDP trends.