ANALYZING THE DYNAMIC RELATIONSHIPS BETWEEN MACROECONOMIC VARIABLES AND GDP GROWTH IN ALBANIA: A PANEL DATA APPROACH

Abstract

This study examines the impact of various macroeconomic factors on GDP growth in Albania during the period 1997-2023. Using a panel data approach, the analysis investigates the relationship between GDP growth and variables such as trade openness, inflation, government expenditure, domestic credit, population growth, final consumption expenditure, gross fixed capital formation, and the current account balance. The results indicate that government expenditure and trade openness are statistically significant determinants of GDP growth. Granger causality tests reveal that domestic credit and government expenditure Granger-cause the current account balance, while domestic credit and trade openness Granger-cause GDP growth. The findings suggest that policies aimed at increasing government spending and promoting trade integration can positively impact economic growth in Albania. However, further research is needed to explore the long-term effects of these variables and to address potential limitations of the study.