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The Trade-Growth Nexus in the Developing Countries: a Quantile Regression Approach

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  • Gilles Dufrénot
  • Valérie Mignon
  • Charalambos Tsangarides

Abstract

This paper applies quantile regression techniques to investigate how the impact of trade openness on the growth rate of per capita income varies with the conditional distribution of growth. Using formal robustness analyses, we first identify robust variables affecting economic growth (investment, government balance, terms of trade, inflation, and population growth) which we then use as controls in the quantile regression estimations. Our findings suggest a heterogeneous trade-growth nexus: for both the long-run and the short-run, the effect of openness on growth is higher in countries with low growth rates compared to those of high growth rates. Our results cast doubt on earlier literature that finds little effect of openness on growth, and suggest that the implications of parameter heterogeneity in the openness-growth relationship need to be considered before prescribing policies.

Suggested Citation

  • Gilles Dufrénot & Valérie Mignon & Charalambos Tsangarides, 2009. "The Trade-Growth Nexus in the Developing Countries: a Quantile Regression Approach," Working Papers 2009-04, CEPII research center.
  • Handle: RePEc:cii:cepidt:2009-04
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    1. Sultan, Maryam & Munir, Kashif, 2015. "Export, Import and Total Trade Potential of Pakistan: A Gravity Model Approach," MPRA Paper 66621, University Library of Munich, Germany.
    2. José Manuel Pastor & José Manuel Pavía & Lorenzo Serrano & Emili Tortosa-Ausina, 2016. "Rich regions, poor regions and bank branch deregulation in Spain," Working Papers 2016/02, Economics Department, Universitat Jaume I, Castellón (Spain).
    3. Marta Simões & João Sousa Andrade & Adelaide Duarte, 2012. "Convergence and Growth: Portugal in the EU 1986-2010," GEMF Working Papers 2012-13, GEMF, Faculty of Economics, University of Coimbra.
    4. Jinzhao Chen, 2015. "Interprovincial Competitiveness and Economic Growth: Evidence from Chinese Provincial Data (1992–2008)," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 388-414, August.
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    6. Damette, Olivier & Delacote, Philippe, 2012. "On the economic factors of deforestation: What can we learn from quantile analysis?," Economic Modelling, Elsevier, pages 2427-2434.
    7. Moelders, Florian, 2011. "Trade Persistence and the Limits of Trade Agreements," Proceedings of the German Development Economics Conference, Berlin 2011 58, Verein für Socialpolitik, Research Committee Development Economics.
    8. Matthias Helble & Catherine Mann & John Wilson, 2012. "Aid-for-trade facilitation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 357-376.
    9. Fabrício J. Missio & Frederico G. Jayme Jr. & Gustavo Britto & José Luis Oreiro, 2015. "Real Exchange Rate and Economic Growth: New Empirical Evidence," Metroeconomica, Wiley Blackwell, vol. 66(4), pages 686-714, November.
    10. Gnimassoun, Blaise, 2015. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 36-74.
    11. Matthias Helble & Catherine Mann & John Wilson, 2012. "Aid-for-trade facilitation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 357-376.
    12. repec:voj:journl:v:64:y:2017:i:3:p:297-314 is not listed on IDEAS
    13. Iván Arribas & Jesús Peiró-Palomino & Emili Tortosa-Ausina, 2015. "Is full banking integration desirable?," Working Papers 2015/05, Economics Department, Universitat Jaume I, Castellón (Spain).
    14. Coulibaly, Issiaka & Gnimassoun, Blaise, 2013. "Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa," Economic Modelling, Elsevier, vol. 32(C), pages 463-482.
    15. Paniagua, Jordi & Figueiredo, Erik & Sapena, Juan, 2015. "Quantile regression for the FDI gravity equation," Journal of Business Research, Elsevier, vol. 68(7), pages 1512-1518.
    16. Aparicio, Sebastian & Urbano, David & Audretsch, David, 2016. "Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 45-61.
    17. Rangan Gupta & Lardo Stander & Andrea Vaona, 2017. "Openness and Growth: Is the Relationship Non-Linear?," Working Papers 201703, University of Pretoria, Department of Economics.
    18. Sophie Béreau & Antonia López Villavicencio & Valérie Mignon, 2012. "Currency misalignments and growth: a new look using nonlinear panel data methods," Applied Economics, Taylor & Francis Journals, vol. 44(27), pages 3503-3511, September.
    19. Frantisek Cech & Jozef Barunik, 2017. "Measurement of Common Risk Factors: A Panel Quantile Regression Model for Returns," Working Papers IES 2017/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Sep 2017.
    20. João Sousa Andrade & Adelaide Duarte & Marta Simões, 2014. "A Quantile Regression Analysis of Growth and Convergence in the EU: Potential Implications for Portugal," Notas Económicas, Faculty of Economics, University of Coimbra, issue 39, pages 48-72, June.
    21. Jesmin Rahman & Ara Stepanyan & Jessie Yang & Li Zeng, 2015. "Exports in a Tariff-Free Environment; What Structural Reforms Matter? Evidence from the European Union Single Market," IMF Working Papers 15/187, International Monetary Fund.
    22. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    23. Lee, Jim, 2011. "Export specialization and economic growth around the world," Economic Systems, Elsevier, vol. 35(1), pages 45-63, March.
    24. repec:eee:wdevel:v:102:y:2018:i:c:p:243-261 is not listed on IDEAS

    More about this item

    Keywords

    Quantile regression; Growth-trade nexus; Developing countries;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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