Growth volatility and trade: evidence from the 1967-1975 closure of the Suez Canal

Parinduri, Rasyad (2012): Growth volatility and trade: evidence from the 1967-1975 closure of the Suez Canal.

Abstract

This paper examines the effects of trade on economic growth and growth volatility. Using the 1967-1975 closure of the Suez Canal as an instrument for trade, I find that trade leads to higher economic growth, and lower probability of recession or economic slowdown. There is no evidence that trade reduces growth volatility, however.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic growth, volatility, trade, IV method
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

References

Acemoglu, K., Zilibotti, F., 1997. Was Prometheus Unbound by Chance? Risk, Diversification, and Growth. Journal of Political Economy. 105(4), 709-751.

Alcala, F., Ciccone, A., 2004. Trade and Productivity. Quarterly Journal of Economics. 119(2), 613-646.

Bernard, A.B., Redding, S.J., Schott, P.K., 2006. Multi-Product Firms and Trade Liberalization. National Bureau of Economic Research Working Paper 12782.

Cavallo, E.A., 2008. Output Volatility and Openness to Trade: A Reassessment. Economia. 9(1), 105-138.

di Giovanni, J., Levchenko, A.A., 2009. Trade Openness and Volatility. Review of Economics and Statistics. 91(3), 558-585.

Dollar, D., Kraay, A., 2004. Trade, Growth, and Poverty. Economic Journal. 114(493), F22-F49.

Estevadeordal, A., Taylor, A.M., 2008. Is the Washington Consensus Dead? Growth, Openness, and the Great Liberalization, 1970s-2000s. National Bureau of Economic Research Working Paper 14264.

Feyrer, J., 2009. Distance, Trade, and Income – The 1967 to 1975 Closing of the Suez Canal as a Natural Experiment. National Bureau of Economic Research Working Paper 15557.

Frankel, J.A., Romer, D., 1999. Does Trade Cause Growth? American Economic Review. 89(3), 379-399.

Grossman, G.M., Helpman, E., 1991. Innovation and Growth in the Global Economy. MIT Press, Cambridge, MA.

Haddad, M.E., Lim, J.J., Saborowski, C., 2010. Trade Openness Reduces Growth Volatility When Countries Are Well Diversified. World Bank Policy Research Working Paper 5222.

Harrison, A., Rodriquez-Clare, A., 2009. Trade, Foreign Investment, and Industrial Policy for Developing Countries. National Bureau of Economic Research Working Paper 15261.

Melitz, M.J., 2003.The Impact of Trade on Intra-Industry Allocations and Aggregate Industry Productivity. Econometrica. 71(6), 1695-1725.

Rodriguez, F., Rodrik, D., 1999. Trade Policy and Economic Growth: A Skeptic’s Guide to Cross-National Evidence. CEPR Discussion Papers 214

Romalis, J., 2007. Market Access, Openness, and Growth. National Bureau of Economic Research Working Paper 13048.

Rose, A.K., 2004. Do We Really Know That the WTO Increases Trade? American Economic Review. 94(1), 98-114.

Singh, T., 2010. Does International Trade Cause Economic Growth? A Survey. The World Economy. 33(11), 1517–1564.