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How Much Do Trading Partners Matter for Economic Growth?

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  • Vivek B. Arora
  • Athanasios Vamvakidis
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    Abstract

    This paper empirically examines the extent to which a country''s economic growth is influenced by its trading partner economies. Panel estimation results based on four decades of data for over 100 countries show that trading partners'' growth and relative income levels have a strong effect on domestic growth, even after controlling for the influence of common global and regional trends. One interpretation is that conditional convergence is stronger, the richer are a country''s trading partners. A general implication of the results is that industrial countries benefit from trading with developing countries, which grow rapidly, while developing countries benefit from trading with industrial countries, which have relatively high incomes.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/26.

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    Length: 21
    Date of creation: 01 Feb 2004
    Date of revision:
    Handle: RePEc:imf:imfwpa:04/26

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    Related research

    Keywords: Economic growth; trading partners; trading partner; trade share; open economies; partner countries; international trade; world growth; conditional convergence; global integration; economic integration; trade flow; trade openness; regional trade; trade agreements; global trading; closed economies; impact of trade; tariff barriers; non-tariff barriers; regional trade agreements; trade protection; domestic output; income convergence; regional integration; trade flows; world trade; trade reform; domestic investment; world economy; global shocks; global trading partners; standard variables; trade patterns; trade liberalization; tariff rates; international integration; average tariff; closed ? economies; human capital; average tariff rate; aggregate demand; trade determinants; tariff rate; external trade;

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    1. Harrison, Ann, 1991. "Openness and growth : a time series, cross-country analysis for developing countries," Policy Research Working Paper Series 809, The World Bank.
    2. Francesco Caselli & Gerardo Esquivel & Fernando Lefort, 1997. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Working Papers Central Bank of Chile 03, Central Bank of Chile.
    3. repec:rus:hseeco:123570 is not listed on IDEAS
    4. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
    5. Greenaway, David & Morgan, Wyn & Wright, Peter W, 1998. "Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?," Economic Journal, Royal Economic Society, vol. 108(450), pages 1547-61, September.
    6. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
    7. Allan D. Brunner, 2003. "The Long-Run Effects of Tradeon Income and Income Growth," IMF Working Papers 03/37, International Monetary Fund.
    8. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
    9. Navaretti, Giorgio Barba & Tarr, David G, 2000. "International Knowledge Flows and Economic Performance: A Review of the Evidence," World Bank Economic Review, World Bank Group, vol. 14(1), pages 1-15, January.
    10. Spilimbergo, Antonio, 2000. " Growth and Trade: The North Can Lose," Journal of Economic Growth, Springer, vol. 5(2), pages 131-46, June.
    11. Robert E. Baldwin, 2003. "Openness and Growth: What's the Empirical Relationship?," NBER Working Papers 9578, National Bureau of Economic Research, Inc.
    12. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-85, May.
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    Citations

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    Cited by:
    1. Ramirez, Andres & Kwok, Chuck C.Y., 2010. "Settling the debate on multinational capital structure using the CEPR measure," Journal of Multinational Financial Management, Elsevier, vol. 20(4-5), pages 251-271, December.
    2. Korhonen, Iikka & Ledyaeva, Svetlana, 2010. "Trade linkages and macroeconomic effects of the price of oil," Energy Economics, Elsevier, vol. 32(4), pages 848-856, July.
    3. Das, Gouranga Gopal & Andriamananjara, Soamiely, 2004. "Hub-and-Spokes Free-Trade-Agreements in the Presence of Technology Spillovers: An Application to the Western Hemisphere," Working Papers 15870, United States International Trade Commission, Office of Economics.
    4. Kim, Dong-Hyeon & Lin, Shu-Chin & Suen, Yu-Bo, 2010. "Dynamic effects of trade openness on financial development," Economic Modelling, Elsevier, vol. 27(1), pages 254-261, January.
    5. M. Ayhan Kose & Christopher M. Towe & Guy Meredith, 2004. "How Has Nafta Affected the Mexican Economy? Review and Evidence," IMF Working Papers 04/59, International Monetary Fund.
    6. Baharumshah, Ahmad Zubaidi & Onwuka, Kevin Odulukwe & Habibullah, Muzafar Shah, 2007. "Is a regional trade bloc a prelude to multilateral trade liberalization?: Empirical evidence from the ASEAN-5 economies," Journal of Asian Economics, Elsevier, vol. 18(2), pages 384-402, April.
    7. Nadeem Ilahi & Riham Shendy, 2008. "Do the Gulf Oil-Producing Countries Influence Regional Growth? T+L3886he Impact of Financial and Remittance Flows," IMF Working Papers 08/167, International Monetary Fund.
    8. AkIn, Cigdem & Kose, M. Ayhan, 2008. "Changing nature of North-South linkages: Stylized facts and explanations," Journal of Asian Economics, Elsevier, vol. 19(1), pages 1-28, February.
    9. Harm Zebregs, 2004. "Intraregional Trade in Emerging Asia," IMF Policy Discussion Papers 04/1, International Monetary Fund.
    10. Garbis Iradian, 2007. "Rapid Growth in Transition Economies," IMF Working Papers 07/170, International Monetary Fund.

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