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Trade Openness: An Australian Perspective

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  • SIMON GUTTMANN
  • ANTHONY RICHARDS

Abstract

Australia's external trade is relatively low compared with the size of its economy. Indeed, Australia's openness ratio (exports plus imports as a proportion of GDP) in 2002 was the third‐lowest among the 30 OECD countries. This paper seeks to understand Australia's low openness by analysing the empirical determinants of aggregate country trade. We present an equation for country openness which explains a substantial amount of the cross‐country variation. The most important explanators of openness are population and a measure of distance to potential trade partners. Countries with larger populations trade less, as do countries that are relatively more remote. Furthermore, after controlling for trade policy there is little evidence of a positive correlation between openness and economic development. The openness equation suggests that Australia's level of trade is relatively close to what would be expected. The most important factors in explaining Australia's low openness ratio are its large geographic size and distance to the rest of the world.

Suggested Citation

  • Simon Guttmann & Anthony Richards, 2006. "Trade Openness: An Australian Perspective," Australian Economic Papers, Wiley Blackwell, vol. 45(3), pages 188-203, September.
  • Handle: RePEc:bla:ausecp:v:45:y:2006:i:3:p:188-203
    DOI: 10.1111/j.1467-8454.2006.00287.x
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    6. Cosmas S. Mbogela, 2019. "An Empirical study on the determinants of trade openness in the African economies," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 9(3), pages 1-2.
    7. Simon Guttmann & Anthony Richards, 2006. "Trade Openness: An Australian Perspective," Australian Economic Papers, Wiley Blackwell, vol. 45(3), pages 188-203, September.
    8. Mustafa, Ghulam & Rizov, Marian & Kernohan, David, 2017. "Growth, human development, and trade: The Asian experience," Economic Modelling, Elsevier, vol. 61(C), pages 93-101.
    9. Cortes, Maria, 2007. "Composition of Trade between Australia and Latin America: Gravity Model," Economics Working Papers wp07-19, School of Economics, University of Wollongong, NSW, Australia.
    10. Ilya Bolotov & Kateřina Gajdušková, 2013. "Comparison of Market Openness of Brazil, Russia, India and China and of the Central and Eastern European Countries [Srovnání otevřenosti trhů Brazílie, Ruska, Indie a Číny a zemí střední a východní," Současná Evropa, Prague University of Economics and Business, vol. 2013(3), pages 9-34.
    11. Ehsan Rasoulinezhad & Gil Seong Kang, 2016. "A Panel Data Analysis of South Korea’s Trade with OPEC Member Countries: The Gravity Model Approach," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 20(2), pages 203-224, Spring.
    12. Ilya Bolotov & Radek Čajka & Kateřina Gajdušková, 2013. "The Economic Balance of the Czech Republic and Slovakia During the Economic Crisis," Prague Economic Papers, Prague University of Economics and Business, vol. 2013(4), pages 504-523.
    13. Michael Bleaney & Håvard Halland, 2009. "The Resource Curse and Fiscal Policy Volatility," Discussion Papers 09/09, University of Nottingham, CREDIT.
    14. Dejan Romih, 2014. "Australia’S Trade In Goods With Slovenia And The Western Balkan," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 17-19, October.
    15. Liudmila Popova & Ehsan Rasoulinezhad, 2016. "Have Sanctions Modified Iran’s Trade Policy? An Evidence of Asianization and De-Europeanization through the Gravity Model," Economies, MDPI, vol. 4(4), pages 1-15, October.
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    19. Cosmas S. Mbogela, 2018. "Determinants of Africa - BRIC Countries Bilateral Trade Flows," Economy, Asian Online Journal Publishing Group, vol. 5(1), pages 40-53.

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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