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Does simultaneity exaggerate empirical tests of the trade-growth relationship?

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  • Hendrik Van den Berg

Abstract

Simultaneity between the volume of trade and national output may have biased past empirical tests of the export-growth relationship. To judge the extent of such bias, this paper compares results of single- and simultaneous- equation regression models of trade and growth that closely resemble the specifications of previous studies. In order to enhance the analysis, a number of other alleged shortcomings of previous statistical studies of trade and growth are addressed: omitted variable bias and non-stationarity are dealt with by using modern time-series regression procedures, measurement error is reduced by using more accurate measures of capital and labour available for six Latin American countries over the period 1960-1990, and both imports and exports are used to proxy trade. The results shown that simultaneity bias causes single equation results to understate, not over state, the trade-growth relationship.

Suggested Citation

  • Hendrik Van den Berg, 1996. "Does simultaneity exaggerate empirical tests of the trade-growth relationship?," Applied Economics Letters, Taylor & Francis Journals, vol. 3(4), pages 225-231.
    • Handle: RePEc:taf:apeclt:v:3:y:1996:i:4:p:225-231
    DOI: 10.1080/758520869
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    Cited by:

    1. Atrayee Ghosh Roy, 2009. "Evidence on economic growth and government size," Applied Economics, Taylor & Francis Journals, vol. 41(5), pages 607-614.
    2. Antonio N. Bojanic, 2012. "The Impact of Financial Development and Trade on the Economic Growth of Bolivia," Journal of Applied Economics, Taylor & Francis Journals, vol. 15(1), pages 51-70, May.

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