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How Much Do Trading Partners Matter for Economic Growth?

Author

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  • Vivek Arora

    (International Monetary Fund)

  • Athanasios Vamvakidis

    (International Monetary Fund)

Abstract

This paper empirically examines the extent to which a country's economic growth is influenced by the economies of its trading partners. Panel estimation results based on four decades of data for more than 100 countries show that trading partners' growth has a strong effect on domestic growth, even after controlling for the influence of common global and regional trends. The results are robust to instrumental variable estimation and other robustness tests. Trading partners' relative income levels are also positively correlated with growth, suggesting that the richer a country's trading partners, the stronger is conditional convergence. A general implication of the results is that countries benefit from trading with fast-growing and relatively more developed countries.

Suggested Citation

  • Vivek Arora & Athanasios Vamvakidis, 2005. "How Much Do Trading Partners Matter for Economic Growth?," IMF Staff Papers, Palgrave Macmillan, vol. 52(1), pages 24-40, April.
    • Handle: RePEc:pal:imfstp:v:52:y:2005:i:1:p:24-40
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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F15 - International Economics - - Trade - - - Economic Integration

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