Maintaining International Trade Liberalization of Small Transitional Economies

It is widely believed that an overall economic growth increasingly depends on rapid export growth. As a result, governments of many developing countries have introduced policies to stimulate outward-oriented growth and liberalization of international trade. Amongst other advantages, such policies tend to speed up the poverty reduction in backward economies, and those countries that maintain restrictive policies towards the liberalization of international trade experience slow economic recovery and growth. Nevertheless, the most recent economic crises suggests that highly open countries - smaller and transitional, in particular - are more vulnerable to external shocks, as their economies dominate by small and immature firms therefore the extent of vulnerability is supposedly higher. In this paper we attempt to measure the effectiveness of outward oriented strategies on a sample of 24 small transitional countries from Central Europe, the Baltic region, South-eastern Europe, and the Caucasian region. In so doing we employed quantitative methodology where we tested four interlinked hypothesis. We have classified measures of trade openness into two broad categories: measures of openness to trade flows and measures of openness (or restrictiveness) of trade regime. Our research identifies a number of important factors that determine economic growth and development.