Finance, Competitiveness, and Innovation in Focus

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The series captures the experience, innovative approaches and solutions for development of the World Bank Group covering financial sector topics of relevance to both the public and private sectors. The series is comprised of short knowledge notes, policy notes, case studies, lessons learned or a combination therein. This series was formerly known as Finance in Focus.

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Albania: Trade Impact of CEFTA

2018-12, World Bank Group

Regional free trade agreements (FTAs) have a sizable effect on exports and foster economic growth. While reducing tariffs in member countries, regional FTAs harmonize trade policy across regions and reduce regulation uncertainty for exporters. They are particularly important for supporting trade in isolated countries such as Albania, a transition economy in the Western Balkans. This policy note looks at the impact of membership in the Central European Free Trade Agreement (CEFTA) on Albania's export growth. It finds that Albanian exports to CEFTA members have grown much faster than its exports to other countries. A large share of this growth is contributed by firms that did not export to CEFTA countries previously and via new exports that were among the least traded to CEFTA countries. We also measure the impact of CEFTA on Albanian exports using a gravity equation, which finds that CEFTA increased Albanian exports to member countries between 34 percent and 144 percent.