Author(s): Edona Sekiraca, Gazmend Luboteni
The purpose of this paper is to investigate the relationship between the current account deficit and the determinants of the current account of the balance of payments of Kosovo during the period 2010Q1–2020Q4. Current account deficit to GDP, growth rate, foreign direct investment, remittances, real effective exchange rate, net foreign assets, trade balance and trade openness are selected as variables that may affect current account deficit in Kosovo. After we have established the existence of panel cointegration in the sample, we have estimated cointegration equations using FMOLS and DOLS method. The empirical results find out that current account balances are positively correlated with foreign direct investment, fiscal balance, real effective exchange rate, remittances and growth rate, while indicators of net foreign assets, trade openness and trade balance are negatively correlated with current account balances.