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The effects of autocatalytic trade cycles on economic growth

  • Jurriën J. Bakker

    ()

    (Eindhoven University of Technology)

  • Oscar Afonso

    ()

    (University of Porto, Faculty of Economics, CEFUP)

  • Sandra T. Silva

    ()

    (University of Porto, Faculty of Economics, CEFUP)

In the first part of this paper the effects of trade cycles on economic growth are discussed to test the hypothesis of autocatalytic trade cycles, which indicates that more innovation is produced in countries that are a part of these cycles. Using United Nations data, a trade network is constructed and from this network, a set of variables that represent the participation of countries in trade cycles are constructed. A clear relation between these variables and economic growth is found. However, this relationship changes for different trade cycle sizes, categories of goods and time scales. Trade cycles also have a positive effect for the trade flows involved, although this effect differ significantly depending on the size of the trade cycle. The second part of the paper shows that the effects of trade cycles can be translated into policy recommendations. These conclusions strenghten existing literature but also add new insights to innovation policy and the pursuit of economic prosperity.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 451.

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Length: 26 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:por:fepwps:451
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