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Trade Openness and Growth

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Author Info

  • Andreas Billmeier
  • Tommaso Nannicini

Abstract

Studies of the impact of trade openness on growth are based either on cross-country analysis-which lacks transparency-or case studies-which lack statistical rigor. We apply transparent econometric methods drawn from the treatment evaluation literature to make the comparison between treated (i.e., open) and control (i.e., closed) countries explicit while remaining within a unified statistical framework. First, matching estimators highlight the rather far-fetched country comparisons underlying common cross-country results. When appropriately restricting the sample, we confirm a positive and significant effect of openness on growth. Second, we apply synthetic control methods-which account for endogeneity due to unobservable heterogeneity-to countries that liberalized their trade regime and we show that trade liberalization has often had a positive effect on growth.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/156.

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Length: 52
Date of creation: 01 Jul 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/156

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Related research

Keywords: Trade policy; Economic growth; Economic models; gdp per capita; real gdp; trade openness; trade liberalization; transition economies; international trade; per capita income; economic liberalization; trade regime; impact of trade; black market premium; growth rate; liberalized trade; trade policies; income convergence; gdp growth; trade volumes; political economy; trade barriers; policy regimes; trade components; average tariffs; openness measure; non-tariff barriers; dynamic impact; global integration; geographic proximity; export marketing; tariff barriers; per capita income growth; national policies; free trade; international exchange of goods; open trade; closed economy; closed economies; open trade policies;

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References

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  1. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 181-205, July.
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Citations

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Cited by:
  1. Paolo Pinotti, 2012. "The Economic Costs of Organized Crime: Evidence from Southern Italy," Working Papers 054, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
  2. Basarab Gogoneaţă, 2010. "The Long-Run Relationship Between Commerce And Sustainable Development In Baltic And Central And Eastern European Countries," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 12(27), pages 36-51, February.
  3. De Lombaerde, Philippe A.A., 2009. "On the dynamic measurement of economic openness," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 731-736, September.
  4. World Bank, 2009. "Macedonia - Moving to Faster and More Inclusive Growth A Country Economic Memorandum : Main Report and Annex," World Bank Other Operational Studies 3067, The World Bank.
  5. Lee, Jim, 2011. "Export specialization and economic growth around the world," Economic Systems, Elsevier, vol. 35(1), pages 45-63, March.
  6. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo Group Munich.
  7. Amr Hosny, 2012. "Algeria’s Trade with GAFTA Countries: A Synthetic Control Approach," Transition Studies Review, Springer, vol. 19(1), pages 35-42, September.
  8. Jang, Tae-Seok & Okano, Eiji, 2013. "Productivity shocks and monetary policy in a two-country model," Dynare Working Papers 29, CEPREMAP.
  9. Gilles Dufrénot & Valérie Mignon & Charalambos Tsangarides, 2009. "The Trade-Growth Nexus in the Developing Countries: a Quantile Regression Approach," Working Papers 2009-04, CEPII research center.

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