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Once Again, is Openness Good for Growth?

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  • International Monetary Fund

Abstract

Rodriguez and Rodrik (2000) argue that the relation between openness and growth is still an open question. One of the main problems in the assessment of the effect is the endogeneity of the relation. In order to address this issue, this paper applies the identification through heteroskedasticity methodology to estimate the effect of openness on growth while properly controlling for the effect of growth on openness. The results suggest that openness would have a positive effect on growth, although small. This result stands, despite the equally robust effect from growth to openness.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/135.

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Length: 29
Date of creation: 01 Jul 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/135

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Keywords: Economic growth; black market; equations; equation; black market premium; correlation; covariance; simultaneous equations; covariance matrix; statistics; descriptive statistics; finite variance; autocorrelation; instrumental variables; confidence interval; regression analysis; instrumental variable; significance level; demand curve; cointegration; samples; econometrics; simultaneous equation; correlations; time series; standard deviation; linear models; logarithm; statistic; random walks; correlation analysis; survey; cross-country variation; equation system;

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References

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  1. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains from Variety," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 541-585, May.
  2. Roberto Rigobon & Brian Sack, 2001. "Measuring the Reaction of Monetary Policy to the Stock Market," NBER Working Papers 8350, National Bureau of Economic Research, Inc.
  3. Robert E. Baldwin, 2003. "Openness and Growth: What's the Empirical Relationship?," NBER Working Papers 9578, National Bureau of Economic Research, Inc.
  4. Caporale, Guglielmo Maria & Cipollini, Andrea & Demetriades, Panicos O., 2005. "Monetary policy and the exchange rate during the Asian crisis: identification through heteroscedasticity," Journal of International Money and Finance, Elsevier, vol. 24(1), pages 39-53, February.
  5. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 133-162, January.
  6. Roberto Rigobon & Brian Sack, 2003. "Spillovers Across U.S. Financial Markets," NBER Working Papers 9640, National Bureau of Economic Research, Inc.
  7. Rigobon, Roberto, 2002. "The curse of non-investment grade countries," Journal of Development Economics, Elsevier, vol. 69(2), pages 423-449, December.
  8. Sentana, Enrique & Fiorentini, Gabriele, 2001. "Identification, estimation and testing of conditionally heteroskedastic factor models," Journal of Econometrics, Elsevier, vol. 102(2), pages 143-164, June.
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  10. Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, vol. 39(1), pages 31-57, July.
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  12. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1553-1575, November.
  13. Roberto Rigobon, 2002. "Contagion: How to Measure It?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 269-334 National Bureau of Economic Research, Inc.
  14. Caporale, Guglielmo Maria & Cipollini, Andrea & Spagnolo, Nicola, 2005. "Testing for contagion: a conditional correlation analysis," Journal of Empirical Finance, Elsevier, vol. 12(3), pages 476-489, June.
  15. Roberto Rigobon & Dani Rodrik, 2004. "Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships," NBER Working Papers 10750, National Bureau of Economic Research, Inc.
  16. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  17. Vincent Hogan & Roberto Rigobon, 2003. "Using Heteroscedasticity to Estimate the Returns to Education," Working Papers 200301, School Of Economics, University College Dublin.
  18. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
  19. Edward E. Leamer, 1979. "Is it a Demand Curve, or is it a Supply Curve?: Partial Identification Through Inequality Constraints," UCLA Economics Working Papers 153, UCLA Department of Economics.
  20. Vamvakidis, Athanasios, 2002. " How Robust Is the Growth-Openness Connection? Historical Evidence," Journal of Economic Growth, Springer, vol. 7(1), pages 57-80, March.
  21. M. Nowak & Ketil Hviding & Luca Antonio Ricci, 2004. "Can Higher Reserves Help Reduce Exchange Rate Volatility?," IMF Working Papers 04/189, International Monetary Fund.
  22. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth : revisiting the evidence," Policy Research Working Paper Series 3004, The World Bank.
  23. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
  24. James H. Stock & Francesco Trebbi, 2003. "Retrospectives: Who Invented Instrumental Variable Regression?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 177-194, Summer.
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