TEFMJ Trends in Economics, Finance, and Management Journal TEFMJ 2671-3357 2671-3365 Balkan University Press 10.69648/DTNU6090 105 Research Article The Effects of Unemployment and Trade on Economic Growth: Case of Western Balkans Mustafa Edita International Balkan University – Skopje 10 07 2026 8 1 27 36 CC BY-NC-ND 4.0

This research paper investigates the effects of unemployment and trade on economic growth in countries of Western Balkan. Using panel data for the time span 2000-2023 and employing the fixed and random effects regression models, this study aims to provide better understanding concerning the correlation of abovementioned variables. The results suggest that there is a statistically significant effect of both independent variables, such as unemployment and trade on GDP per capita. Hausman test justified the use of the random effect model as an appropriate model for analysis. As expected considering the theoretical framework, the empirical evidence shows that higher unemployment harms GDP per capita, while trade improves it. This brings into focus the importance of trade openness especially in small open economies and proposing measures and control over the rise of unemployment.

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