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How Much Do Trading Partners Matter for Economic Growth?

  • Vivek B. Arora
  • Athanasios Vamvakidis
Registered author(s):

    This paper empirically examines the extent to which a country's economic growth is influenced by its trading partner economies. Panel estimation results based on four decades of data for over 100 countries show that trading partners' growth and relative income levels have a strong effect on domestic growth, even after controlling for the influence of common global and regional trends. One interpretation is that conditional convergence is stronger, the richer are a country's trading partners. A general implication of the results is that industrial countries benefit from trading with developing countries, which grow rapidly, while developing countries benefit from trading with industrial countries, which have relatively high incomes.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=17141
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/26.

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    Length: 21
    Date of creation: 01 Feb 2004
    Date of revision:
    Handle: RePEc:imf:imfwpa:04/26
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    1. repec:rus:hseeco:123570 is not listed on IDEAS
    2. Navaretti, Giorgio Barba & Tarr, David G, 2000. "International Knowledge Flows and Economic Performance: A Review of the Evidence," World Bank Economic Review, World Bank Group, vol. 14(1), pages 1-15, January.
    3. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
    4. Robert E. Baldwin, 2003. "Openness and Growth: What's the Empirical Relationship?," NBER Working Papers 9578, National Bureau of Economic Research, Inc.
    5. Greenaway, David & Morgan, Wyn & Wright, Peter W, 1998. "Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?," Economic Journal, Royal Economic Society, vol. 108(450), pages 1547-61, September.
    6. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
    7. Allan D. Brunner, 2003. "The Long-Run Effects of Tradeon Income and Income Growth," IMF Working Papers 03/37, International Monetary Fund.
    8. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-85, May.
    9. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
    10. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
    11. Ann Harrison, 1995. "Openness and Growth: A Time-Series, Cross-Country Analysis for Developing Countries," NBER Working Papers 5221, National Bureau of Economic Research, Inc.
    12. Spilimbergo, Antonio, 2000. " Growth and Trade: The North Can Lose," Journal of Economic Growth, Springer, vol. 5(2), pages 131-46, June.
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