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Does Trade Liberalization Cause a Long Run Economic Growth in Turkey

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  • Utku Utkulu
  • Durmus Özdemir

Abstract

Based on ‘endogenous’ growth theory, the paper examines the effect of trade liberalization on long-run income per capita and economic growth in Turkey. Although the presumption must be that free trade has a beneficial effect on long run growth, counter examples can also be found. This controversy increases the importance of empirical work in this area. Using the most recent data we employ multivariate cointegration analysis to test the long run relationship among the variables in hand. In a multivariate context, the effect of determinants such as increasing returns to scale, investment in human and physical capital are also included in both theoretical and empirical works. Our causality evidence between the long run growth and a number of indicators of trade liberalizations confirms the predictions of the ‘new growth theory’. However, the overall effect of the possible breaks and/or policy change and unsustainability in the 1990s looks contradictory and deserves further investigation. Copyright Springer 2005

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Bibliographic Info

Article provided by Springer in its journal Economic Change and Restructuring.

Volume (Year): 37 (2004)
Issue (Month): 3 (09)
Pages: 245-266

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Handle: RePEc:kap:ecopln:v:37:y:2004:i:3:p:245-266

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Web page: http://www.springerlink.com/link.asp?id=113294

Related research

Keywords: economic growth; openness; Turkey; F43; 024; 052; C5;

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References

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  1. Jeffrey A. Frankel, David Romer and Teresa Cyrus., 1995. "Trade and Growth in East Asian Countries: Cause and Effect?," Center for International and Development Economics Research (CIDER) Working Papers C95-050, University of California at Berkeley.
  2. Frankel, Jeffrey & Cavallo, Eduardo, 2004. "Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, or Less? Using Gravity to Establish Causality," Working Paper Series rwp04-038, Harvard University, John F. Kennedy School of Government.
  3. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  4. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  5. Joshua Aizenman & Ilan Noy, 2009. "Endogenous Financial and Trade Openness," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 175-189, 05.
  6. Alwyn Young, 1992. "A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 13-64 National Bureau of Economic Research, Inc.
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Cited by:
  1. Utku Utkulu & Dilek Seymen, 2004. "Trade and Competitiveness Between Turkey and the EU: Time Series Evidence," Working Papers 2004/8, Turkish Economic Association, revised Mar 2004.
  2. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
  3. Secil Pacaci Elitok & Al Campbell, 2008. "The Balance of Payments as a Constraint on Turkey’s Growth: 1960-2004," Working Paper Series, Department of Economics, University of Utah 2008_13, University of Utah, Department of Economics.

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