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Trade Liberalisation, Economic Crises and Growth

Many economic reforms are undertaken at a time of economic crisis. But is this a good time to undertake trade reform? In this paper we investigate whether an economic crisis at the time of trade liberalisation affects a country’s subsequent growth performance. We employ threshold regression techniques on five crisis indicators commonly used in the literature, to identify the relevant “crisis values” and to estimate the differential post-liberalisation growth effects in the crisis and non-crisis regimes. We find that the post-liberalisation growth depends on the characteristics of the crisis. Broadly speaking, an internal crisis implies lower growth and an external crisis higher growth relative to the non-crisis regime. These effects appear to be present in both the short and longer runs.

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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 08/14.

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Handle: RePEc:not:notgep:08/14
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