Systematic Leadership and Trade Openness

Studies of hegemonic stability tend to specify periods when hegemony is present or absent in the world system. Periods in which hegemony is present are expected to exhibit openness for trade. Periods in which hegemony is absent should be associated with trade closure. Partially as a consequence of this nominal measurement strategy, scholars continue to be unsure whether hegemony and systemic leadership are linked to the openness of the world's trading system. We contend that analysts need to devote more attention to the sources of preponderance and less to its arbitrary presence or absence. Focusing on the U.S. from 1870 to 1990, we first articulate a theory linking certain political-economic systemic leadership variables to trade openness, in terms of the directions, signs, and diffusion speed of the causal links. We then estimate Granger causality and distributed lag models to test our predictions empirically. The empirical results support our theoretical interpretation. The Granger causalities between world trade openness and the systemic leadership variables are found to be reciprocal, with the effects of systemic leadership on world trade openness working faster than those of world trade openness on the hegemon. World trade openness exerts a negative effect on systemic leadership, while systemic leadership promotes world trade openness.