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The Impact of Trade Liberalization on the Trade Balance in Developing Countries

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  • Jiandong Ju
  • Yi Wu
  • Li Zeng

Abstract

Using two recently constructed measures of trade liberalization dates, this article studies the impact of trade liberalization on imports, exports, and overall trade balance for a large sample of developing countries. We find strong and consistent evidence that trade liberalization leads to higher imports and exports. However, in contrast to Santos-Paulino and Thirlwall (2004), who found a robustly negative impact of trade liberalization on the overall trade balance, we find only mixed evidence of such a negative impact. In particular, we find little evidence of a statistically significant negative impact using our first measure of liberalization dates, which extends Li (2004). Using a second measure of liberalization dates compiled by Wacziarg and Welch (2003), we find some evidence that liberalization worsens the trade balance, but the evidence is not robust across different estimation specifications, and the estimated impact is smaller than that reported by Santos-Paulino and Thirlwall (2004).

Suggested Citation

  • Jiandong Ju & Yi Wu & Li Zeng, 2010. "The Impact of Trade Liberalization on the Trade Balance in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 427-449, June.
  • Handle: RePEc:pal:imfstp:v:57:y:2010:i:2:p:427-449
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    Citations

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    Cited by:

    1. Jiandong Ju & Kang Shi & Shang-Jin Wei, 2012. "Trade Reforms and Current Account Imbalances: When Does the General Equilibrium Effect Overturn a Partial Equilibrium Intuition?," NBER Working Papers 18653, National Bureau of Economic Research, Inc.
    2. repec:eaa:aeinde:v:17:y:2017:i:2_10 is not listed on IDEAS
    3. Ju, Jiangdong & Shi, Kang & Wei, Shang-Jin, 2013. "Trade reforms and current account imbalances," BOFIT Discussion Papers 25/2013, Bank of Finland, Institute for Economies in Transition.
    4. Lei Wen & Haiwen Zhou, 2012. "Financial and Product Market Integration under Increasing Returns to Scale," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 38(1), pages 18-36.
    5. Jones, Chris & Morrissey, Oliver & Nelson, Doug, 2011. "Did the World Bank Drive Tariff Reforms in Eastern Africa?," World Development, Elsevier, vol. 39(3), pages 324-335, March.
    6. Gulzar Ali & Zhaohua Li, 2016. "Analyzing the role of Imports in Economic Growth of Pakistan; Evidence from ARDL Bound Testing Approach," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(9), pages 19-37, September.

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