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Exports and Economic Growth of East European Economies, 1996–2007

In: Money, Banking and Financial Markets in Central and Eastern Europe

Author

Listed:
  • Shahdad Naghshpour
  • Bruno S. Sergi

Abstract

The argument whether export causes growth dates back to Ricardo and the comparative advantage. According to this theory, free trade increases the production of traded goods due to lower costs for each country. The assumption that the goods are ‘normal goods’ ensures that lower prices induced by increased production increase the utility of the citizens of each trading partner. Of course, in order to increase production in the export sector, the production of other sector(s) must be reduced. The ‘logical’ choice is therefore the production of imported goods. Needless to say, in order for trade to occur, the trading countries must engage in both the import and export of goods. The net effect of increased exports and imports is positive, resulting in increased production, which is defined as growth.

Suggested Citation

  • Shahdad Naghshpour & Bruno S. Sergi, 2010. "Exports and Economic Growth of East European Economies, 1996–2007," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Roman Matousek (ed.), Money, Banking and Financial Markets in Central and Eastern Europe, chapter 9, pages 179-196, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-30221-1_9
    DOI: 10.1057/9780230302211_9
    as

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