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The empirics of trade and growth: where are the policy recommendations?

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  • Klaus Wälde
  • Christina Wood

Abstract

Existing literature repeatedly documented a strong correlation between trade and growth. It has also shown a causal effect of imports (though not necessarily exports) on growth in simultaneous equation models but to a lesser extent in Granger-causality tests. Export and import taxes have sometimes been found to negatively affect growth. Drawing policy conclusions from these general findings for a particular country is difficult not only because of the contradictory results but also because of potential second best world effects and the implied endogeneity of trade policy. Policy recommendations for a specific country require a careful analysis of market and institutional arrangements and can not be based on the existing cross-country literature.

Suggested Citation

  • Klaus Wälde & Christina Wood, 2004. "The empirics of trade and growth: where are the policy recommendations?," European Economy - Economic Papers 2008 - 2015 204, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0204
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    2. Daniel Koshiyama & Denilson Alencastro & Adelar Fochezatto, 2007. "International Trade and Economic Growth in Latin America: a Granger Causality Analysis with Panel Data," EcoMod2007 23900046, EcoMod.
    3. Guisan, M.C. & Exposito, P., 2006. "Production by sector in China, India and OECD Countries, 1985-2005," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 6(2).
    4. Guisan, M.C. & Exposito, P., 2005. "Industry and Foreign Trade in India, China and OECD countries: an analysis of causality, 1960-2002," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(3), pages 5-16.
    5. Wälde, Klaus, 2000. "Does trade cause growth? A policy perspective," Dresden Discussion Paper Series in Economics 10/00, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    6. Christian Beer & Christian Alexander Belabed & Andreas Breitenfellner & Christian Ragacs & Beat Weber, 2017. "EU integration and its impact on Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/2017, pages 1-38.
    7. Nursini Nursini, 2017. "Effect of Fiscal Policy and Trade Openness on Economic Growth in Indonesia: 1990-2015," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 358-364.
    8. Kutan, Ali M. & Yigit, Taner M., 2007. "European integration, productivity growth and real convergence," European Economic Review, Elsevier, vol. 51(6), pages 1370-1395, August.
    9. Mamoon, Dawood, 2017. "Government Regulation and Policy trumps Courts in determining Economic Growth," MPRA Paper 82454, University Library of Munich, Germany.
    10. World Bank, 2002. "The Federal Democratic Republic of Ethiopia : Developing Exports to Promote Growth," World Bank Publications - Reports 15422, The World Bank Group.
    11. Scott L. Baier & Jeffrey H. Bergstrand, 2004. "Trade agreements and trade flows: Estimating the effect of free trade agreements on trade flows with an application to the European Union," European Economy - Economic Papers 2008 - 2015 214, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    12. Christian Beer & Christian Alexander Belabed & Andreas Breitenfellner & Christian Ragacs & Beat Weber, 2017. "Österreich und die europäische Integration," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 86-126.
    13. Grieben, Wolf-Heimo & Sener, Fuat, 2009. "Globalization, rent protection institutions, and going alone in freeing trade," European Economic Review, Elsevier, vol. 53(8), pages 1042-1065, November.
    14. Mamoon, Dawood & S. Murshed, Mansoob, 2005. "Does Growth Respond to a Good Trade Policy?," MPRA Paper 82017, University Library of Munich, Germany.

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    More about this item

    Keywords

    theoretical trade and growth studies; empirical trade and growth studies; policy recommendations; Wälde; Wood;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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