(The Relationship Between Openness to Foreign Trade and Absorptive Capacities in Transition Economies in The Balkans)

Abstract

Purpose –The openness to foreign trade measure that is expressed as the ratio of sum of a country’s exports and imports to its Gross Domestic Product is considered as an indicator of globalization at the same time. The absorptive capacity on the other hand, shows to what extend countries could benefit from foreign financial flows and is considered as an indicator of development, which also denotes institutional quality along with infrastructural quality. In this study, the effects of absorptive capacity on the openness to foreign trade are investigated. Design/methodology/approach – As a natural outcome of globalization, openness to foreign trade has shown tendency to grow in many countries. Ex-Soviet Bloc countries defined as the Transition Economies are no exception in this matter. Balkan Transition Economies located in South-East Europe are distinguished from other ex-Soviet countries and are subject to this study in that being far from the Russian hinterland and not being European Union members as of yet. The model used in the study is handled through panel data analysis and regressed. Findings – It is econometrically revealed that absorptive capacities in countries in question positively affected openness to foreign trade in those countries. Moreover, applied other various econometric tests also confirm the integrity and reliability of the data and model. Discussion – In this way, the importance of absorptive capacities in Transition Economies in the Balkans who did not yet completed their transition, emerges and the necessity of pursuing absorptive capacity enhancing policies is emphasized.