Abstract: The debate over the effects of population on economic growth and vice-versa, has separated academics since Malthusian times. The existing literature on the population-economy relationship provides diverse conclusions, influenced by differing methodologies, timeframes, and country-specific factors. Considering the dynamic developments of population and economic growth in Albania from 1981-2021, the analysis of these variables becomes crucial in understanding their reciprocal effect and building proper population policies such as pro-natal and pro-immigrant policies. For this purpose, we used time-series econometric methods, including the Granger causality test and Johansen cointegration test to investigate long-term equilibrium relationships of population and economic growth. The results show that the second lag of population growth has a significant negative coefficient, indicating a negative impact on GDP growth two periods later, whereas the third lag of population growth is marginally significant, hinting at a delayed influence that may still be relevant but not as strong. On the other hand, the results suggest that changes in GDP growth do not have a short-term predictive impact on population growth within the framework of this model. Finally, the Johansen cointegration test established the presence of a long-term equilibrium relationship between population growth and GDP growth, meaning that despite short-term fluctuations, the two variables tend to balance over time. These findings emphasize the complexity of the relationship between population and economic growth, particularly in a country like Albania which has experienced demographic shifts such as emigration, declining birth rates, and aging populations. Policymakers should adopt forward-looking approaches in order to anticipate future demographic trends and their potential effects on economic performance.

Keywords: Population, GDP growth, Demographic shifts, Economic Development, Granger causality, Johansen cointegration, Structural breaks

Pages: 1514-1528