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The Empirics of Trade and Growth : Where are the Policy Recommendations ?

  • Klaus, WAELDE

    (European Commission-Brussels and University of Dresden-Germany and CESifo and IRES-Université Catholique de Louvain)

  • Christina, WOOD

    (The World Bank, PREM, West Africa Group, Washington)

Existing literature repeatedly documented a strong correlation between trade and growth. It has also shown a causal effect of imports (though not necessarily exports) on growth in simultaneous equation models but to a lesser extent in Granger-causality tests. Export and import taxes have sometimes been found to negatively affect growth. Drawing policy conclusions from these general findings for a particular country is difficult not only because of the contradictory results but also because of potential second best world effects and the implied endogeneity of trade policy. Policy recommendations for a specific country require a careful analysis of market and institutional arrangements and can not be based on the existing cross-country literature.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004013.

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Date of creation: 01 Mar 2004
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Handle: RePEc:ctl:louvir:2004013
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