ECONOMIC GROWTH IN SOUTH EASTERN EUROPE: AN INVESTIGATION FOR SIX EU CANDIDATE AND POTENTIAL CANDIDATE COUNTRIES

Abstract

The South Eastern European region (SEE) has seen major beneficial transformation in the recent years. Romania and Bulgaria in 2007 and Croatia in 2013 became members of the European Union and registered significant economic growth rates. This paper investigates some important factors that influence economic growth in 6 EU candidate and potential candidate countries (Albania, Bosnia and Herzegovina, Kosovo, Former Yugoslav Republic of Macedonia, Montenegro and Serbia) and offers to policy makers in those countries key insights for stimulating the economy. The paper proposes a dynamic growth model which will be developed using the Quasi-maximum likelihood (QML) estimation. This model is suited for this type of analysis because of the small T sample and also to cope with missingness. The results indicate that nine out of the fourteen variables were statistically significant. The number of non-resident tourists, the number of passenger cars, the number of children in pre-primary and primary-education are positive factors for economic growth. In contrast, government debt, inflation, all energy imports, railway transportation and primary production of coal and lignite are hindering development.