Does Trade Openness Matter for Economic Growth in the CEE Countries?

Njindan Iyke, Bernard (2016): Does Trade Openness Matter for Economic Growth in the CEE Countries? Published in: Review of Economic Perspectives

Abstract

This paper sets out to answer the question: Is trade openness important for economic growth in the Central and Eastern European (CEE) countries? The policy-oriented measures of trade openness used in earlier studies have been argued to be subjective, while the simple outcome-oriented measures only capture one aspect of trade openness, namely: countries’ share of trade. Hence, following Squalli and Wilson (2011), the paper constructs a new outcome-oriented measure of trade openness which captures a country’ share of trade, and its interaction and interconnectedness with the rest of the world. Using fixed effects regressions for 17 CEE countries over the period 1994 – 2014, the paper finds trade openness to be important for growth within the CEE countries. In particular, the results show that increases in trade openness is associated with increases in real GDP per capita growth within these countries. The results appear significantly the same after we dropped Croatia and Estonia – two historically closed economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade Openness; Economic Growth; CEE Countries; Panel Data
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

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