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Does openness lead to sustained economic growth? Export growth versus other variables as determinants of economic growth

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  • Sanika Sulochani Ramanayake
  • Keun Lee

Abstract

This research revisits the issue of economic growth determinants in developing countries with a focus on international integration variables. Four alternative variables are tested, namely, export growth, trade openness, export diversification, and foreign direct investment (FDI), in a single framework. This study finds that export growth is the most robust, in addition to export specialization, and that traditional variables of trade openness and FDI are not robust. This result is based on the econometric estimations that use not only cross-section and fixed-effect panel estimations but also system generalized method of moments estimations. The findings warn against the traditional emphasis on simple trade openness and FDI as policy prescriptions for developing countries. In other words, simply opening an economy for international integration does not guarantee sustained economic growth unless these actions lead to export growth, which requires capability building in indigenous firms and investments in innovations. This observation is consistent with the experiences of successful economies in Asia, such as Korea, Taiwan, and China.

Suggested Citation

  • Sanika Sulochani Ramanayake & Keun Lee, 2015. "Does openness lead to sustained economic growth? Export growth versus other variables as determinants of economic growth," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 20(3), pages 345-368, July.
    • Handle: RePEc:taf:rjapxx:v:20:y:2015:i:3:p:345-368
    DOI: 10.1080/13547860.2015.1054164
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    References listed on IDEAS

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    1. Anne O. Krueger, 1978. "Foreign Trade Regimes and Economic Development: Liberalization Attempts and Consequences," NBER Books, National Bureau of Economic Research, Inc, number krue78-1.
    2. John Williamson, 1994. "The Political Economy of Policy Reform," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 68, April.
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    Cited by:

    1. Sanika Sulochani Ramanayake & Chandana Shrinath Wijetunga, 2017. "Rethinking the development of post-war Sri Lanka based on the Singapore model," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2017-009, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Ambya Ambya & Lies Maria Hamzah, 2022. "Indonesian Coal Exports: Dynamic Panel Analysis Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 390-395.
    3. Muhammad Akram GILAL* & Muhammad AJMAIR** & Sohail FAROOQ***, 2019. "Structural Changes And Economic Growth In Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 29(1), pages 35-51.
    4. , Aisdl, 2020. "The Impact of Trade Facilitation on Vietnam’s Trade Flows," OSF Preprints uvw8p, Center for Open Science.
    5. Wonkyu Shin & Sehwan Oh & Sungho Rho, 2019. "Innovation and Exports of Korean Firms: How Do They Differ by Size and Industry?," Millennial Asia, , vol. 10(3), pages 249-271, December.
    6. Sanika Sulochani Ramanayake & Taniya Ghosh, 2017. "Role of gender gap in economic growth: Analysis on developing countries versus OECD countries," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2017-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    7. Keun Lee & Sanika Sulochani Ramanayake, 2018. "Adding-Up Problem and Wage–Productivity Gap in Exports of Developing Countries: A Source of the Middle-Income Trap," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(5), pages 769-788, December.
    8. Anh Tru Nguyen, 2018. "The Relationship among Economic Growth, Trade, Unemployment, and Inflation in South Asia: A Vector Autoregressive Model Approach," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 5(2), pages 165-172.
    9. Salamatu Bellah Conteh & Yuan Yijun & Brima Sesay, 2021. "Economic Growth Effects of the Interaction of Trade Openness and Institutions Quality: Empirical Evidence from Sub-Saharan Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 34-48.
    10. Victoria Pistikou, 2020. "The Impact of CEFTA on Exports, Economic Growth and Development," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 13(3), pages 15-31, December.
    11. Reena Marwah & Sanika Sulochani Ramanayake, 2021. "Pandemic-Led Disruptions in Asia: Tracing the Early Economic Impacts on Sri Lanka and Thailand," South Asian Survey, , vol. 28(1), pages 172-198, March.

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