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Has trade been driving global economic growth?

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  • Leon Podkaminer

Abstract

The last 50 years have produced a series of revolutionary technological changes. These decades have also witnessed a truly revolutionary systemic change at the global level. The change started with step-wise internal liberalisations and deregulations in the major industrialised countries. The internal systemic changes have been synchronised with the consecutive waves of liberalisation of international economic relations. Advancing globalisation has been paralleled by the global economic growth becoming progressively slower and unstable. Using the standard tools of time series econometrics (VEC,Granger non-causality testing, ARDL) the paper suggests that trade has not been driving global economic growth (or even that expanding trade may have slowed down global output growth). Large and persistent trade imbalances which have become typical since the mid- 1970s are just one possible reason for trade no longer playing the positive role assigned to it in the trade theories. The second reason relates to the ‘race-to-thebottom’ tendencies with respect to the wage rate which have developed under globalisation. These tendencies may have been responsible for the persistent shortage of aggregate demand at the global level and – consequently – weakening global output growth.

Suggested Citation

  • Leon Podkaminer, 2016. "Has trade been driving global economic growth?," NBP Working Papers 251, Narodowy Bank Polski.
  • Handle: RePEc:nbp:nbpmis:251
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    References listed on IDEAS

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    1. Leon Podkaminer, 2014. "Does trade drive global output growth?," Bank i Kredyt, Narodowy Bank Polski, vol. 45(4), pages 311-330.
    2. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
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    6. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, January.
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    9. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
    10. Leon Podkaminer, 2013. "Persistent gaps between purchasing power parities and exchange rates under the law of one price: a puzzle (partly) explained?," Bank i Kredyt, Narodowy Bank Polski, vol. 44(4), pages 333-352.
    11. Leon Podkaminer, 2011. "Why Are Goods Cheaper In Rich European Countries? Beyond The Balassa–Samuelson Effect," Metroeconomica, Wiley Blackwell, vol. 62(4), pages 712-728, November.
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    Cited by:

    1. Leon Podkaminer, 2021. "Does trade support global output growth? Further evidence on the global trade – global output connection," Bank i Kredyt, Narodowy Bank Polski, vol. 52(1), pages 23-36.
    2. Ivano Cardinale & Michael Landesmann, 2016. "Exploring Sectoral Conflicts of Interest in the Eurozone: A Structural Political Economy Approach," wiiw Essays and Occasional Papers 3, The Vienna Institute for International Economic Studies, wiiw.

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    More about this item

    Keywords

    world income; world trade; globalisation; wage-led growth; VEC; Granger causality;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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