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Once Again, is Openness Good for Growth?

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  • International Monetary Fund

Abstract

Rodriguez and Rodrik (2000) argue that the relation between openness and growth is still an open question. One of the main problems in the assessment of the effect is the endogeneity of the relation. In order to address this issue, this paper applies the identification through heteroskedasticity methodology to estimate the effect of openness on growth while properly controlling for the effect of growth on openness. The results suggest that openness would have a positive effect on growth, although small. This result stands, despite the equally robust effect from growth to openness.

Suggested Citation

  • International Monetary Fund, 2004. "Once Again, is Openness Good for Growth?," IMF Working Papers 04/135, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:04/135
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    More about this item

    Keywords

    Economic growth; Trade openness; endogeneity; identification through heteroskedasticity; black market; equations; equation; black market premium; correlation; Trade: General; Economic Growth of Open Economies; Economic Growth and Aggregate Productivity: General; Multiple or Simultaneous Equation Models: Models with Panel Data; Trade openess;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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