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Analyzing Trade Growth Effects of Deviations from Long-run Economic Growth

Author

Listed:
  • Naanwaab Cephas B.

    (Department of Economics, College of Business and Economics, North Carolina A&T State University, 1601 East Market Street, Greensboro, NC27411, USA)

  • Edwards Jeffrey A.

    (Department of Economics, North Carolina A&T State University, Greensboro, USA)

Abstract

This paper explores the relationship between trade growth and long-run trends in real GDP growth from a purely empirical perspective. Its novelty lies in the way that it models trade growth: as a function of cyclical trends in real GDP growth. The main finding is that trade growth responds asymmetrically to deviations from long-run GDP growth. Generally, trade growth is positive and statistically significant when GDP growth is above the long-run trend. On the other hand, trade growth ceases but does not become negative when GDP growth falls below its long-run trend. While this behavior holds true broadly, individual countries’ trade growth may respond differently when GDP growth is above or below trend. Comparatively, low-income countries’ trade growth takes the greatest hit when economic growth slows, while lower-middle and high-income countries are least affected. These findings have potential implications for trade policy-making in the twenty-first Century especially given the current atmosphere of anti-globalization and slow trade growth.

Suggested Citation

  • Naanwaab Cephas B. & Edwards Jeffrey A., 2017. "Analyzing Trade Growth Effects of Deviations from Long-run Economic Growth," Global Economy Journal, De Gruyter, vol. 17(4), pages 1-11, December.
    • Handle: RePEc:bpj:glecon:v:17:y:2017:i:4:p:11:n:5
    DOI: 10.1515/gej-2017-0060
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    More about this item

    Keywords

    trade growth; GDP growth; imports; exports; business cycle;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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