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Trade Openness and Economic Growth: A Panel Cointegration and Causality Analysis for the Newest EU Countries

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  • Nikolaos Dritsakis
  • Pavlos Stamatiou

Abstract

This paper explores the relationship between trade openness and economic growth using data for the thirteen newest European Union members. The study covers the period of 1995–2013. We have applied panel cointegration and causality approaches to examine the long-run and the causal relationship between the variables. Empirical results confirm the presence of a cointegrating vector between trade openness and economic growth, in this group of the thirteen countries. An error correction model (ECM), followed by the two steps of Engle and Granger was used to capture the short and long-run dynamics. The impact of economic growth and trade openness is found to be positive. Finally, the panel Granger causality analysis reveals a unidirectional causal relationship running from trade openness to economic growth, both in the short and in the long-run.

Suggested Citation

  • Nikolaos Dritsakis & Pavlos Stamatiou, 2016. "Trade Openness and Economic Growth: A Panel Cointegration and Causality Analysis for the Newest EU Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 45-60, March.
    • Handle: RePEc:rej:journl:v:18:y:2016:i:59:p:45-60
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    References listed on IDEAS

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    Cited by:

    1. Sayef Bakari, 2017. "The Three-Way Linkages Between Export, Import And Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth, , vol. 2(3), pages 13-53, December.
    2. Lawrence MASHIMBYE & Ashenafi Beyene FANTA, 2021. "Trade Openness And Economic Growth In Mozambique," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 21(2), pages 37-52.
    3. Bakari, Sayef & Saaidia, Fatma, 2017. "Assessment of Commerce Potency on Economic Growth in Italy: Empirical Analysis," MPRA Paper 76473, University Library of Munich, Germany.
    4. Rojas Cama, Freddy A. & Emara, Noha, 2022. "Financial inclusion and gross capital formation: A sectoral analysis approach for the MENA region and EMs," International Review of Financial Analysis, Elsevier, vol. 79(C).
    5. Young Ademola Obafemi, 2022. "Specialization Versus Diversification as Alternative Strategies for Sustainable Growth in Resource-Rich Developing Countries. Case of Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 32(3), pages 1-47, September.
    6. Attila Jambor & Nuno Carlos Leitao, 2017. "Economic Growth and Sustainable Development: Evidence from Central and Eastern Europe," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 171-177.
    7. Rupal Chowdhary & Isha Joshi, 2022. "Economic Growth and Trade Openness: A Case of ASEAN 9," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 3-14.
    8. Bakari, Sayef & MABROUKI, Mohamed, 2016. "The Relationship among Exports, Imports and Economic Growth in Turkey," MPRA Paper 76044, University Library of Munich, Germany.
    9. Spahiu Muhamet J. & Durguti Esat A., 2023. "Impact of Financial Liberalization on Export: Evidence from Kosovo," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(2), pages 95-111, June.

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    More about this item

    Keywords

    trade openness; economic growth; Vector Error Correction Model; panel cointegration; Panel Causality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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