Advanced Search
MyIDEAS: Login to save this article or follow this journal

How does trade openness influence budget deficits in developing countries?

Contents:

Author Info

  • Jean-Louis Combes
  • Tahsin Saadi-Sedik

Abstract

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.tandfonline.com/doi/abs/10.1080/00220380600930762
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 42 (2006)
Issue (Month): 8 ()
Pages: 1401-1416

as in new window
Handle: RePEc:taf:jdevst:v:42:y:2006:i:8:p:1401-1416

Contact details of provider:
Web page: http://www.tandfonline.com/FJDS20

Order Information:
Web: http://www.tandfonline.com/pricing/journal/FJDS20

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 1999. "What Drives Private Saving Across the World?," Working Papers Central Bank of Chile 47, Central Bank of Chile.
  2. Ricardo Hausmann & Alberto Alesina & Rudolf Hommes & Ernesto H. Stein, 1998. "Budget Institutions and Fiscal Performance in Latin America," Research Department Publications 4160, Inter-American Development Bank, Research Department.
  3. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
  4. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  5. Paul Cashin & Catherine A. Pattillo, 2000. "Terms of Trade Shocks in Africa," IMF Working Papers 00/72, International Monetary Fund.
  6. Schuknecht, Ludger, 1999. "Fiscal policy cycles and the exchange rate regime in developing countries," European Journal of Political Economy, Elsevier, vol. 15(3), pages 569-580, September.
  7. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Marco Terrones & Luis Catão, 2001. "Fiscal Deficits and Inflation," IMF Working Papers 01/74, International Monetary Fund.
  9. Patrick GUILLAUMONT & Jean-Louis COMBES, 2000. "Commodity Price Volatility, Vulnerability and Development," Working Papers 200015, CERDI.
  10. Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers 7499, National Bureau of Economic Research, Inc.
  11. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  12. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  13. Sebastian Edwards & Guido Tabellini, 1990. "Explaining Fiscal Policies and Inflation in Developing Countries," NBER Working Papers 3493, National Bureau of Economic Research, Inc.
  14. Robert E. Baldwin, 1989. "Measuring Nontariff Trade Policies," NBER Working Papers 2978, National Bureau of Economic Research, Inc.
  15. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-98, March.
  16. Robert Lensink & Hong Bo & Elmer Sterken, 1999. "Does uncertainty affect economic growth? An empirical analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(3), pages 379-396, September.
  17. Spilimbergo, Antonio & Londono, Juan Luis & Szekely, Miguel, 1999. "Income distribution, factor endowments, and trade openness," Journal of Development Economics, Elsevier, vol. 59(1), pages 77-101, June.
  18. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  19. P. Guillaumont & J.-L Combes & S. Guillaumont Jeanneney & P. Motel Combes, 2000. "Ouverture sur l'extérieur et instabilité des taux de croissance," Revue Française d'Économie, Programme National Persée, vol. 15(1), pages 3-33.
  20. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  21. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  22. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
  23. Bohn, Henning, 1990. "Tax Smoothing with Financial Instruments," American Economic Review, American Economic Association, vol. 80(5), pages 1217-30, December.
  24. Savvides, Andreas, 1998. "Trade policy and income inequality: new evidence," Economics Letters, Elsevier, vol. 61(3), pages 365-372, December.
  25. Bevan, David, 1999. "Trade Liberalization and the Budget Deficit," Journal of Policy Modeling, Elsevier, vol. 21(6), pages 653-694, November.
  26. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
  27. Deaton, A., 1999. "Commodity Prices and Growth in Aftica," Papers 186, Princeton, Woodrow Wilson School - Development Studies.
  28. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
  29. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Christian Hubert EBEKE, 2011. "Remittances, Countercyclicality, Openness and Government Size," Discussion Papers (REL - Recherches Economiques de Louvain) 2011044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Somlanare Romuald KINDA & Pascale COMBES MOTEL & Jean-Louis COMBES, 2014. "Do Environmental Policies Hurt Trade Performance?," Working Papers 201404, CERDI.
  3. Carola Pessino & Ricardo Fenochietto, 2010. "Determining countries’ tax effort," Hacienda Pública Española, IEF, vol. 195(4), pages 65-87, december.
  4. Leslie Teo & David Cowen & Hemant Shah & Ranil Salgado & Alessandro Zanello, 2006. "Financial Integration in Asia," IMF Working Papers 06/196, International Monetary Fund.
  5. Foued Chihi & Michel Normandin, 2008. "External and Budget Deficits in Developing Countries," Cahiers de recherche 0819, CIRPEE.
  6. Christian Ebeke, 2011. "Transferts des migrants, ouverture sur l'extérieur et dépenses publiques dans les pays en développement," Working Papers halshs-00552983, HAL.
  7. Éva Polgár & Julia Wörz, 2010. "No risk and some fun? Trade and wages in the enlarged European Union," Empirica, Springer, vol. 37(2), pages 127-163, May.
  8. David A. Grigorian & Hamid Reza Davoodi, 2007. "Tax Potential vs. Tax Effort," IMF Working Papers 07/106, International Monetary Fund.
  9. Lis, Eliza M. & Nickel, Christiane, 2009. "The impact of extreme weather events on budget balances and implications for fiscal policy," Working Paper Series 1055, European Central Bank.
  10. Martin Petri & Tahsin Saadi-Sedik, 2006. "To Smooth or Not to Smooth," IMF Working Papers 06/257, International Monetary Fund.
  11. Christian Ebeke & Dilan Ölcer, 2013. "Fiscal Policy over the Election Cycle in Low-Income Countries," IMF Working Papers 13/153, International Monetary Fund.
  12. Ricardo Fenochietto & Carola Pessino, 2013. "Understanding Countries’ Tax Effort," IMF Working Papers 13/244, International Monetary Fund.
  13. Azim M. Sadikov & Hans P. Lankes & Dustin Smith & Katrin Elborgh-Woytek & Jean-Jacques Hallaert, 2006. "Fiscal Implications of Multilateral Tariff Cuts," IMF Working Papers 06/203, International Monetary Fund.
  14. Jean-Louis COMBES & Gérard CHAMBAS & Jean-François BRUN, 2006. "Recettes publiques des pays en développement. Méthode d’évaluation," Working Papers 200611, CERDI.
  15. Diallo, Oumar, 2009. "Tortuous road toward countercyclical fiscal policy: Lessons from democratized sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 31(1), pages 36-50.
  16. repec:pdn:wpaper:46 is not listed on IDEAS

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:taf:jdevst:v:42:y:2006:i:8:p:1401-1416. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.