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Economic growth and trade openness: Theory, facts and evidence (1960–2017)

Abstract:

A positive element for the growth of a country is a greater insertion in global trade. The objectives of this research are to estimate the relationship between economic growth and trade openness, as well as to contrast the cointegration and causality between both variables. The research is explanatory, with a documentary design, and is based on cross-sectional econometric models and time series, with statistical information covering the period 1960–2017 for 110 developed and developing countries. According to the study, between growth and openness there is a positive, significant and stable relationship in the long term, however, the results indicate that the effect of openness is low in magnitude in the cross-sectional regressions, which is consistent with the heterogeneity of the world experiences. At the time series level, higher coefficients were found, indicating that openness is positive for growth, although the evidence of causality suggests that openness is only one of the components of growth. It is concluded that, although there is a positive interrelation, a growth and development strategy cannot be based exclusively on international trade, since its incidence seems to be modest.