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How does trade openness influence budget deficits in developing countries? Author info | Abstract | Publisher info | Download info | Related research | Statistics Jean-Louis Combes
Tahsin Saadi-Sedik
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This paper analyses the effects of trade openness on budget balances by distinguishing the effects of natural openness from those of trade policy. Revealed indicators of natural openness and trade policy are computed. Using GMM-system estimator, the econometric analysis focuses on 66 developing countries over 1974--98. The results show that trade openness increases a country's exposure to external shocks. This enforces the negative impact on budget balances of terms of trade instability. Additionally, trade openness influences budget balances through several other channels: corruption, income inequalities, etc. Then natural openness and trade policy have opposite effects: the former deteriorates budget balances whereas the latter enhances them.
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Article provided by Taylor and Francis Journals in its journal The Journal of Development Studies .
Volume (Year): 42 (2006)
Issue (Month): 8 (November)
Pages: 1401-1416
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Keywords: H62 F02 F13 Other versions of this item:
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