Modeling the determinants of exports and imports: assessment of the Macedonian competitive performances

So far Macedonia has undergone an unsuccessful attempt to transition, distinguished by low growth rates, high unemployment, extensive poverty, balance of payments unfavorable position, technological lag etc. The external sector, as a core element to growth perspectives of a small open economy is critically dependant upon the export competitiveness. Consequently, this paper will address some critical points of the Macedonian economy, particularly the vulnerability of the external sector alongside with the price and trade liberalization. The set of analyses is to be carried out to explore the foreign trade structure, current account developments, as well as the major aspects of qualitative competitiveness. In addition, we have examined the impact of macroeconomic variables on exports and imports within the selected timeframe. We have therefore applied a comprehensive approach of dynamic modeling based upon a vector - autoregression model determined to control for endogeneity and set to estimate the long - run equilibrium relations, as well as the short-run dynamics of the key variables.