Impact of Financial Liberalization on Export: Evidence from Kosovo

Abstract

The current study observes the link between export levels, GDP growth, gross savings, lending interest rates, and real interest rates. This study's evaluation approach combines an Ordinary Least Squares (OLS), and Arrellano-Bover/Blundell-Bond estimation to observe the connection among export level, GDP growth, gross savings, lending interest rates, and real interest rate as a component of financial liberalization in the case of Kosovo over 12 years from 2009 to 2020. The findings reveal that GDP growth and lending interest rates have a positive impact on the level of export growth. However, as a component of financial liberalization, real interest rates have a negative impact on the level of exports. Whereas econometric analyses revealed that gross savings were insignificant. The negative relationship between the real interest rate and the level of exports represents that real interest rates restricted the financial possibility for businesses to maximize the level of exports throughout the research period. Due to the limited number of observations, this study is limited to analyzing the long-term correlations between the factors that characterize financial liberalization and export progress in the context of Kosovo. To meet the objective of growing exports, policymakers must design policies to enhance the financial system and invest in infrastructure development to encourage the business sector that exports its products or services.

The Role of Export in Boosting Indonesia’s GDP during Crisis: Macroeconomic Conditions

“…A high exchange rate equals high production costs due to imported raw materials and capital goods. This finding aligns with Spahiu & Durguti (2023), who found a damaging impact of high-interest rates on export, as well as Thorbecke & Sengonul (2023) and Sundari et al (2023), who found a significant effect of exchange rate on export. However, despite the negative impact of both variables, Bank Indonesia implemented its supervisory role in the IDR exchange rate well, resulting in Indonesia's growing export post-Covid-19 pandemic and the ongoing Russia-Ukraine war.…”

“…This result shows the damaging effect of the high-interest rate on the nation's exports. This finding supports Spahiu and Durguti (2023) on the negative impact of interest rates on exports. Das and Biswas (2021) also found the crucial role of interest rates in affecting export and import practices between India and the US, supporting Bhide et al (2010) that unstable foreign exchange and high interest rates hurt international trade and India's economic growth.…”

“…Previous research states that export positively affects GDP (Spahiu & Durguti, 2023). However, in the short term, export has a negative and non-significant effect on economic growth.…”

“…Interest rate has also been found to affect export performance indirectly. Spahiu and Durguti (2023) found a relationship between interest rate, export performance, and country GDP. The high-interest rate will also affect production and capital costs, affecting the business's ability to pursue export markets.…”

“…A rise in fuel price will increase the overall production cost, leading to a higher selling price of a product in the market (Balta-Ozkan & Watson, 2017). Other than fuel price increases, a country's currency exchange and interest rates also affected exports (Spahiu & Durguti, 2023).…”