Impact of Final Consumption, Domestic Investment, Exports, and Imports on Economic Growth in Albania

Akermi, Najwa and Ben Yedder, Nadia and Bakari, Sayef (2023): Impact of Final Consumption, Domestic Investment, Exports, and Imports on Economic Growth in Albania.

Abstract

The aim of this paper is to explore the impact of final consumption, domestic investment, exports and imports on economic growth in the case of Albania during the period 1996 – 2021. By using cointegration analysis, VECM model and WALD test, empirical analysis indicated that there is no causality relationship between final consumption, exports, domestic investment, imports and economic growth in the long run and in the short run. These findings present the critical economic situation of Albania, which stands in need of an entry of urgent economic reforms and strong strategies to boost economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Final Consumption, Domestic Investment, Exports, Imports, Economic Growth, VECM, Albania.
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P33 - International Trade, Finance, Investment, Relations, and Aid; P - Economic Systems > P4 - Other Economic Systems > P45 - International Trade, Finance, Investment, and Aid; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R53 - Public Facility Location Analysis ; Public Investment and Capital Stock

References

Azam, W., Khan, I., & Ali, S. A. (2023). Alternative energy and natural resources in determining environmental sustainability: a look at the role of government final consumption expenditures in France. Environmental Science and Pollution Research, 30(1), 1949-1965.

Abdulla, S., & Ali, H. (2019). An Analysis of Exports and Imports and Their Effect on the Economic Growth in Iraq. UKH Journal of Social Sciences, 3, 68-76

Agalega, E., & Acheampong, P. (2013). The Impact of Inflation, Policy Rate and Government Consumption Expenditure on GDP Growth in Ghana: A Co-Integration Approach. European Journal of Business and Management, 5(15), 170-185.

Almasifard, M. (2013). An econometric analysis of financial development’s effects on the share of final consumption expenditure in gross domestic product (Master's thesis, Eastern Mediterranean University (EMU)-Doğu Akdeniz Üniversitesi (DAÜ)).

Alper, A. (2018). The relationship of economic growth with consumption, investment, unemployment rates, saving rates and portfolio investments in the developing countries. Gaziantep University Journal of Social Sciences, 17(3), 980-987.

Aluko, O. A., & Adeyeye, P. O. (2020). Imports and economic growth in Africa: Testing for granger causality in the frequency domain. The Journal of International Trade & Economic Development, 29(7), 850-864.

Aluko, O. A., & Obalade, A. A. (2020). Import-economic growth nexus in selected African countries: An application of the Toda-Yamamoto Granger non-causality test. Zagreb International Review of Economics & Business, 23(2), 117-128.

Al-Yousif, Y.K. (1997). Exports and Economic Growth; Some Empirical Evidence from the Arab Gulf countries. Applied Economics, 29(6): 693-697.

Amin S. B. (2011). Causal relationship between consumption expenditure and economic growth in Bangladesh World Journal of Social Sciences 1(2), 158 – 169

Aslan, A., & Altinoz, B. (2021). The impact of natural resources and gross capital formation on economic growth in the context of globalization: evidence from developing countries on the continent of Europe, Asia, Africa, and America. Environmental Science and Pollution Research, 28, 33794-33805.

Bakari, S. (2017d). Appraisal of Trade Potency on Economic Growth in Sudan: New Empirical and Policy Analysis. Asian Development Policy Review, 5(4), 213-225.

Bakari, S. (2017b). The impact of olive oil exports on economic growth: Empirical analysis from Tunisia. BİLTÜRK Journal of Economics and Related Studies, 2(3), 441-458.

Bakari, S. (2017a). The Impact of Vegetables Exports on Economic Growth in Tunisia. Economic Research Guardian, 7(2), 72-87.

Bakari, S. (2017e). The Nexus between Export, Import, Domestic Investment and Economic Growth in Japan (No. 76110). University Library of Munich, Germany.

Bakari, S. (2017c). The three-way linkages between export, import and economic growth: New evidence from Tunisia. Journal of Smart Economic Growth, 2(3), 13-53.

Bakari, S. (2018). The impact of citrus exports on economic growth: Empirical analysis from Tunisia. International Journal of Food and Agricultural Economics (IJFAEC), 6(1128-2019-539), 95-112.

Bakari, S. (2019). If France Continues This Strategy, Taxes Will Destroy Domestic Investment and Economic Growth. Journal of Smart Economic Growth, 4(1), 31-45.

Bakari, S. (2021). Reinvest the relationship between exports and economic growth in African countries: New insights from innovative econometric methods (No. 108785). University Library of Munich, Germany.

Bakari, S. (2022). On The Relationship Between Domestic Investment, Exports And Economic Growth: Evidence From Greece. Journal of Smart Economic Growth, 7(3), 13-34.

Bakari, S., & El Weriemmi, M. (2022). Causality between Domestic Investment and Economic Growth in Arab Countries (No. 113077). University Library of Munich, Germany.

Bakari, S., & Mabrouki, M. (2019). The relationship between economic growth, exports and imports in Morocco: An empirical validation based on VAR modeling techniques and causality in the meaning of Granger. Journal of Smart Economic Growth, 4(3), 47-55.

Bakari, S., & Saaidia, F. (2018). Assessment of Commerce Potency on Economic Growth in Italy: Empirical Analysis. Management, 5(1), 64-79.

Bakari, S., & Tiba, S. (2022). Determinants of economic growth: The case of the United States of America. Journal of Developing Economies, 7(1), 29-44.

Bakari, S., Fakraoui, N., & Mabrouki, M. (2020). The Contribution of Domestic Investment, Exports and Imports on Economic Growth: A Case Study of Peru (No. 99041). University Library of Munich, Germany.

Bakari, S., Fakraoui, N., & Tiba, S. (2021). Domestic Investment, Export, Import and Economic Growth in Brazil: An Application of Vector Error Correction Model. Journal of Smart Economic Growth, 6(1), 31-48.

Bakari, S., Mabrouki, M., & Elmakki, A. (2018a). The nexus between industrial exports and economic growth in Tunisia: Empirical analysis. Journal of Smart Economic Growth, 3(2), 31-53.

Bakari, S., Mabroukib, M., & Othmani, A. (2018b). The six linkages between foreign direct investment, domestic investment, exports, imports, labor force and economic growth: new empirical and policy analysis from Nigeria. Journal of Smart Economic Growth, 3(1), 25-43.

Ben Yedder, N., El Weriemmi, M., & Bakari, S. (2023a). The nexus between domestic investment and economic growth in MENA countries; Do Patents matter? (No. 118174). University Library of Munich, Germany.

Ben Yedder, N., El Weriemmi, M., & Bakari, S. (2023b). The Impact of Domestic Investment and Trade on Economic Growth in North Africa Countries: New Evidence from Panel CS-ARDL Model (No. 117956). University Library of Munich, Germany.

Blaževski, R. K. (2018). Influence of the Government Final Consumption Expenditure and the Final Consumption Expenditure of Households and NPISH on Economic Growth in Republic of Croatia – VAR Model. Contemporary Issues in Economy & Technology - (CIET) (pp. 30-41). University Department of Professional Studies, University of Split, Split.

Ceesay, E. K., Biagie, C., & Bittaye, L. (2022). The Impact of General Government Final Consumption Expenditure-Economics Growth nexus for the Gambia. Energy and Environment Research, 12(2), 1-26.

Dritsakis, N. (2006). Exports and economic growth: An empirical investigation of EU, USA and Japan using causality tests. International review of applied economic research, 1(2), 79-92.

Fakraoui, N., & Bakari, S. (2019). Tie Among Domestic Investment, Exports And Economic Growth: Empirical Analysis From India. Journal of Smart Economic Growth, 4(1), 1-15.

Faridi, M. Z. (2012). Contribution of agricultural exports to economic growth in Pakistan. Pakistan Journal of Commerce and Social Sciences (PJCSS), 6(1), 133-146.

Gyimah-Brempong, K. (1991). Export instability and economic growth in sub-Saharan Africa. Economic Development and Cultural Change, 39(4), 815-828.

Hajamini, M., & Falahi, M. A. (2014). The nonlinear impact of government consumption expenditure on economic growth: Evidence from low and low-middle income countries. Cogent Economics & Finance, 2(1), 948122.

Hye, Q. M. A. (2012). Exports, Imports and Economic Growth in China: An ARDL Analysis. Journal of Chinese Economic and Foreign Trade Studies, 5, 42-55

Iwaisako, T., & Futagami, K. (2013). Patent protection, capital accumulation, and economic growth. Economic Theory, 52, 631-668.

Jan, D., Ahmad, M., & Ullah, S. (2019). Impact of Exports and Imports on Economic Growth in Case of Pakistan. International Journal of Information, Business and Management, 11, 142-156.

Kartikasari, D. (2017). The effect of export, import and investment to economic growth of Riau Islands Indonesia. International Journal of Economics and Financial Issues, 7(4), 663-667.

Keho, Y. (2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. Cogent Economics & Finance, 5(1), 1332820.

Kılavuz, E., & Topcu, B. A. (2012). Export and economic growth in the case of the manufacturing industry: panel data analysis of developing countries. International Journal of Economics and Financial Issues, 2(2), 201-215.

Kimaro E. L., Keong C. C and Sea, L., L. (2017) Government expenditure, efficiency and economic growth: A panel analysis of Sub Saharan African low income countries African Journal of Economic Review, 5(2)

Maitra, B. (2020). Exploring import-led growth in India: Evidence from the post-reform period. South Asian Journal of Macroeconomics and Public Finance, 9(1), 87-113.

Mishra, P. K. (2011). The Dynamics of Relationship between Exports and Economic Growth in India. International Journal of Economic Sciences and Applied Research, 4(2), 53.

Nweke, G. O., Odo, S. I., & Anoke, C. I. (2017). Effect of capital formation on economic growth in Nigeria. Asian Journal of Economics, Business and Accounting, 5(1), 1-16.

Obinna, O. (2020). Effect of inflation on household final consumption expenditure in Nigeria. Journal of Economics and Development Studies, 8(1), 104-111.

Ofeh, M. A., & Muandzevara, A. T. (2017). Investigating the effects of migrant remittances on the economic growth of Cameroon. International Journal of Economics and Finance, 9(2), 58-69.

Okyere, I., & Jilu, L. (2020). The impact of export and import to economic growth of Ghana. European Journal of Business and Management, 12(21), 130-138.

Othmani, A., Ben Yedder, N., & Bakari, S. (2023). The Cointegration Relationship between Patent, Domestic Investment and Economic Growth in United States of America (No. 118245). University Library of Munich, Germany.

Ramos, F. F. R. (2001). Exports, imports, and economic growth in Portugal: evidence from causality and cointegration analysis. Economic modelling, 18(4), 613-623.

Reddy, K. K. (2020). Exports, imports and economic growth in India: An empirical analysis. Theoretical and Applied Economics, 27(4), 323-330.

Shah, S. A. Y., Ahmad, N., Aslam, W., & Subhani, B. H. (2020). An analysis of the relationships among exports, imports, physical capital and economic growth in Pakistan. Journal of Quantitative Methods, 4(1), 1-1.

Subhan, M., Alharthi, M., Alam, M. S., Thoudam, P., & Khan, K. (2021). Relationship between exports, economic growth and other economic activities in India: Evidence from VAR model. The Journal of Asian Finance, Economics and Business, 8(12), 271-282.

Sunde, T. (2017). Foreign direct investment, exports and economic growth: ADRL and causality analysis for South Africa. Research in International Business and Finance, 41, 434-444.

Taghavi, M., Goudarzi, M., Masoudi, E., & Gashti, H. P. (2012). Study on the impact of export and import on economic growth in Iran. Journal of Basic and Applied Scientific Research, 2(12), 12787-12794.

Topcu, E., Altinoz, B., & Aslan, A. (2020). Global evidence from the link between economic growth, natural resources, energy consumption, and gross capital formation. Resources Policy, 66, 101622.

Triyawan, A., Latifa, H., Seriki, L. L., & Alfaqeeh, A. (2021). Influence of Export and Import Toward Economic Growth in Canada in 2010-2019. Fokus Ekonomi: Jurnal Ilmiah Ekonomi, 16(2), 341-355.

Trošt, M., & Bojnec, Š. (2015). Causality between public wage bill, exports and economic growth in Slovenia. Economic research-Ekonomska istraživanja, 28(1), 119-131.

Ugochukwu, U. S., & Chinyere, U. P. (2013). The impact of capital formation on the growth of Nigerian economy. Research journal of finance and accounting, 4(9), 36-42.

Vohra, R. (2001). Export and economic growth: Further time series evidence from less-developed countries. International Advances in Economic Research, 7(3), 345-350.

Wibowo, W. (2020). Determinants of regional household final consumption expenditure in Indonesia. JEJAK: Jurnal Ekonomi dan Kebijakan, 13(2), 332-344.

Zhu, W., Ahmad, F., Draz, M. U., Ozturk, I., & Rehman, A. (2022). Revisiting the nexus between exchange rate, exports and economic growth: further evidence from Asia. Economic Research-Ekonomska Istraživanja, 35(1), 7128-7146.