International Journal of Economics and Business Administration
Articles Information
International Journal of Economics and Business Administration, Vol.1, No.2, Sep. 2015, Pub. Date: Aug. 10, 2015
Does Trade Openness Influence Economic Growth?
Pages: 120-127 Views: 1438 Downloads: 1065
[01] Fateh Habibi, Department Economics, Faulty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran.
The aim of this study is to determine the effects of trade openness on economic growth. We use panel cointegration tests and panel error-correction models (ECM) to explore the causal relationship between trade openness and economic growth for 120 countries over the period 2000-2013. The results of pedroni cointegration test demonstrate that trade openness and economic growth is cointegrated; on the other hand, a long run relationship can be fine among these two variables. We segment the data set into four subpanels according to per capita income classification that distinguishes between low-income, lower-middle-income, upper-middle income and high-income economies. The results suggest that the long-run causality between trade openness and growth runs in four panel groups. The result indicates that bidirectional causalities in the study were observed from real GDP growth to trade openness in all panels except low income groups. Second, unidirectional causation from trade openness to economic growth was obtained in the study for low income economies. The desired growth-led openness and openness-led growth hypothesis can only be supported for Upper middle and high income countries.
Trade Openness, Economic Growth, Classification Countries, Panel Data
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