Openness to International Trade and Economic Growth: A Cross-Country Empirical Investigation

Openness to International Trade and Economic Growth: A Cross-Country Empirical Investigation

Title:

Openness to International Trade and Economic Growth: A Cross-Country Empirical Investigation

Number:

14/07

Author(s):

Bülent Ulaşan

Language:

English

Date:

March 2014

Abstract:

This paper examines the long-run relationship between trade openness and economic growth across countries over the period 1960-2000. Two strategies are followed in empirical investigation. First, we extend the augmented neo-classical growth model with an openness variable and estimate it by using a battery of openness measures suggested in the literature. We also construct three composite trade policy indexes consisting of weighted averages of tariff rates, non-tariff barriers and black market premium for foreign exchange rate. Second, we implement Bayesian model averaging technique to deal with the model uncertainty, a fundamental problem which has been plaguing the previous works on the topic. Our findings show that there is no robust link between trade openness and long-run economic growth.

Keywords:

Economic Growth, Trade Openness, Cross-Country Growth Regression, Model Uncertainty, Bayesian Model Averaging

JEL Codes:

F43; O47; C11; C21; C52

Openness to International Trade and Economic Growth: A Cross-Country Empirical Investigation
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