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Role of government in trade and investment boom: lessons from East Asia

Author

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  • Manmohan Agarwal
  • Susmita Mitra

Abstract

This paper extends the empirical analysis on Rodrik's (1995a) domestic investment-led export growth model for East Asia to nine East Asian countries for a longer time period, 1960 through 2004, and tests whether openness Granger-caused investment or vice versa. Our results suggest that there can be no single conclusion about the role of investment in East Asia. Causality has also changed for some countries in different time periods. We question the exogeneity of the investment boom in East Asia, a key assumption made by Rodrik. Government's incentives encouraged investment in export industries through different channels.

Suggested Citation

  • Manmohan Agarwal & Susmita Mitra, 2010. "Role of government in trade and investment boom: lessons from East Asia," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 13(4), pages 285-304.
  • Handle: RePEc:taf:jpolrf:v:13:y:2010:i:4:p:285-304
    DOI: 10.1080/17487870.2010.523954
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    References listed on IDEAS

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    1. Dani Rodrik, 1995. "Trade Strategy, Investment, and Exports: Another Look at East Asia," NBER Working Papers 5339, National Bureau of Economic Research, Inc.
    2. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March.
    3. John Romalis, 2007. "Market Access, Openness and Growth," NBER Working Papers 13048, National Bureau of Economic Research, Inc.
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