Trade Openness, Income Levels, Economic Growth, and Current Account Balances

Murat Çetrez

doi:10.37880/cumuiibf.1101244

EN TR

Trade Openness, Income Levels, Economic Growth, and Current Account Balances

Abstract

The aim of this study is to investigate if the trade openness has an effect on the income levels, growth rates, and on the current account balances together for the first time in the literature. Two different trade openness measures are used. 134 countries are added in four income groups between 1990 and 2019. There is a negative and statistically significant association between trade openness and current account balances for the group of low-income and lower middle-income countries. For upper middle-income and high-income countries, it is not identified any significant associations between trade openness and current account balances. Trade openness increases the growth for all groups except the upper middle-income countries. Results show trade openness widen the current account deficits of many of the low-income and lower middle-income countries. Sustainability of the current account deficits and external debts might be potentially an issue for many low-income, lower middle-income, and some of the middle-income countries especially if the growth rates decrease.

Keywords

Serbest Ticaret, Gelir Düzeyleri, Ekonomik Büyüme ve Cari İşlemler Dengesi

Öz

Bu çalışmada literatürde ilk kez, serbest ticaret ile ekonomik büyüme, serbest ticaret ile cari işlemler dengesi arasındaki ilişkiler eş zamanlı olarak, araştırılmıştır. İki farklı serbest ticaret indeksi kullanılmıştır. Çalışmaya 1990 ve 2019 yılları arasında, 4 gelir grubu için 134 ülke dahil edilmiştir. Düşük gelirli ülkeler ve alt orta gelirli ülkelerden oluşan ülke grubu için serbest ticaret ve cari işlemler dengesi arasında negatif, anlamlı bir ilişki tespit edilmiştir. Üst orta ve yüksek gelirli ülkeler için serbest ticaret ile cari işlemler dengesi arasında anlamlı bir ilişki bulunamamıştır. Artan serbest ticaret, ekonomik büyümeyi üst orta gelirli ülkeler hariç tüm ülke grupları için artırmaktadır. Sonuçlar serbest ticaretin düşük gelirli ve alt orta gelirli birçok ülkenin cari işlemler açığını artırdığını göstermektedir. Bu ülkeler için artan serbest ticaret ile artan cari işlemler açıkları ve yüksek dış borçlar özellikle büyüme oranları da düşerse sürdürülebilirlik sorunu oluşturabilir . Bu durum bazı üst orta gelirli ülkeler için de geçerlidir.

Anahtar Kelimeler

Kaynakça

Almeida, R. and Fernandes A. M. (2008) ‘‘Openness and Technological Innovations in Developing Countries: Evidence from Firm-Level Surveys’’, The Journal of Development Studies, 44(5), 701-727.
Altayligil, Y.B. and Çetrez, M. (2020) ‘‘Macroeconomic. institutional and financial determinants of current account balances: a panel data assessment’’. Journal of Economic Structures, 9, 49.
Arellano, M. (1987) ‘‘Computing Robust Standard Errors for Within-Groups Estimators’’. Oxford Bulletin of Economics and Statistics 49 (4), 431-434.
Baltagi, B., & Wu, P. (1999) ‘‘Unequally Spaced Panel Data Regressions with AR(1) Disturbances’’. Econometric Theory, 15(6), 814-823.
Barro, R. J. and Sala-i-Martin, X. (1997) ‘‘Technological diffusion, convergence, and growth’’, Journal of Economic Growth, 2(1), 1–26.
Ben-David, D. and Loewy, M., (1998) “Free Trade, Growth, and Convergence.”, Journal of Economic Growth 3, 143–170.
Ben-David, D. and Loewy, M., (2000) ‘‘Knowledge Dissemination, Capital Accumulation, Trade, and Endogenous Growth’’, Oxford Economic Papers 52, 637–650.
Ben-David, D. and Loewy, M. (2003) ‘‘Trade and the Neoclassical Growth Model’’, Journal of Economic Integration 18: 1–16.

Bhargava A., Franzini, L. and Narendranathan, W. (1982) ‘‘Serial Correlation and the Fixed Effects Model’’, The Review of Economic Studies, 49(4), 533–549,
Brunner, A.D. (2003) ‘‘The Long-Run Effects of Trade on Income and Income Growth’’, IMF Working Paper WP/03/37. Washington, DC: IMF Institute
Chang, R., Kaltani, L. and Loayza, N.V. (2009) “Openness can be Good for Growth:The role of Policy Complementarities.”, Journal of Development Economics 90, 33–49.
Cheung, C., Furceri, D. and Rustecelli, E. (2013) ‘‘Structural and Cyclical Factors behind Current Account Balances’’, Review of International Economics 21, 923-944.
Chinn, M., Eichengreen, B. and Ito, H. (2014) ‘‘A forensic analysis of global imbalances. Oxford Economic Papers’’, 66 (2), 465–490.
Chinn, M. and Prasad, E. (2003) ‘‘Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration’’, Journal of International Economics. 59, 47–76.
Chinn, M. and Ito, H. (2007) ‘‘Current Account Balances. Financial Development and Institutions: Assaying the World Saving Glut’’, Journal of International Money and Finance. 26(4), 546-569.
Das, D.K. (2016) ‘‘Determinants of current account imbalance in the global economy: a dynamic panel analysis’’, Journal of Economic Structures 5, 8.
Dowrick, S. and Golley, J. (2004) “Trade Openness and Growth: Who Benefits?”, Oxford Review of Economic Policy 20: 38–56.
Driscoll, J. C. and Kraay, A. C. (1998) ‘‘Consistent covariance matrix estimation with spatially dependent panel data’’, Review of Economics and Statistics, 80(4), 549-560.
Eicker, F. (1967) ‘‘Limit Theorems for Regression with Unequal and Dependent Errors’’, Proceedings of the Fifth Berkeley Symposium on Mathematical Statistics and Probability. 59-82. Berkeley. Ca: University of California Press. Retrieved from https://projecteuclid.org/ .
Falvey, R., Foster, N. and Greenaway, D.(2004) ‘‘Imports, exports, knowledge spillovers and growth’’, Economics Letters, 85(2), 209-213.
Frees, E. W. (1995) ‘‘Assessing cross-sectional correlation in panel data’’, Journal of Econometrics, 69(2), 393-414.
Frees, E. W. (2004) ‘‘Longitudinal and panel data: analysis and applications in the social sciences’’, Cambridge University Press.
Freund, C. and Bolaky, B. (2008) “Trade, Regulations, and Income.”, Journal of Development Economics 87, 309–321.
Froot, K.A. (1989) ‘‘Consistent Covariance Matrix Estimation with Cross-Sectional Dependence and Heteroskedasticity in Financial Data’’, Journal of Financial and Quantitative Analysis, 24, 333-355.
Gengenbach. C., Urbain, J. and Westerlund, J. (2016) ‘‘Error correction testing in panels with common sthocastic trends’’, Journal of Applied Econometrics. 31: 982-1004.
Green, W. (2000) ‘‘Econometric Analysis’’, Upper Saddle River, New Jersey, Prentice Hall.
Grossman, G.M., and. Helpman, E. (1990) “Comparative Advantage and Long-Run Growth.”, American Economic Review 80: 796–815.
Grossman, G.M. and Helpman, E. (1991) ‘‘Innovations and Growth in the Global Economy’’, Cambridge: MIT Press.
Gruber, J. and Kamin, S. (2005) ‘‘Explaining the Global Pattern of Current Account Imbalances’’, Journal of International Money and Finance. Volume 26. Issue 4.
Huber, P. J. (1967) ‘‘The Behavior of Maximum Likelihood Estimates under Non-Standard Conditions’’, Proceedings of the Fifth Berkeley Symposium on Mathematical Statistics and Probability. 1. 221-223. Berkeley. Ca: University of California Press. Retrieved from https://projecteuclid.org/ .
IMF World Economic Outlook (2021). ‘‘Recovery During a Pandemic’’, https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021 (Retrieved from.05.02.2022).
Ito, H. and Chinn M. (2007) ‘’East Asia and Global Imbalances: Saving, Investment, and Financial Development’’, no 13364, NBER Working Papers, National Bureau of Economic Research, Inc.
Irwin, D.A., and Tervio, M. (2002) ‘‘Does Trade Raise Income? : Evidence from the Twentieth Century’’, Journal of International Economics 58: 1–18.
Iyke, B. N.(2017) ‘‘Does Trade Openness Matter for Economic Growth in the CEE Countries?’’ , Review of Economic Perspectives, vol.17, no.1, pp.3-24.
Kim, D. (2011) ‘‘Trade, Growth and Income’’, The Journal of International Trade & Economic Development 20: 677–709.
Kim, D., and S. Lin. (2009) ‘‘Trade and Growth at Different Stages of Economic Growth’’, Journal of Development Studies 45: 1211–1224.
Kim, D.H., Lin, S.C. and. Suen, Y.B. (2011) ‘‘Nonlinearity Between Trade Openness and Economic Development’’, Review of Development Economics 15: 279–292.
Lee, H.Y., Ricci, L.A. and Rigobon, R. (2004) ‘‘Once Again, Is Openness Good for Growth?’’ , Journal of Development Economics 75: 451–472.
Manwa, F., Wijeweera, A and Kortt, M. A. (2019) ‘‘Trade and growth in SACU countries: A panel data analysis’’, Economic Analysis and Policy, Volume 63, Pages 107-118,
Menyah, K., Nazlioglu, S. and Wolde-Rufael, Y. (2014) ‘‘Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach’’, Economic Modelling, Volume 37,Pages 386-394.
Noguer, M. and Siscart, M. (2005) ‘‘Trade raises income: a precise and robust result’’, Journal of International Economics, Volume 65, Issue 2, Pages 447-460.
Perera-Tallo, F. (2003) ‘‘Growth due to Globalisation’’, International Economic Review 44: 651–676.
Pesaran, M.H. (2004) ‘‘General Diagnostic Tests for Cross Section Dependence in Panels’’ CESifo Working Paper. 1229: 1-40. Retrieved from https://www.cesifo.org/.
Pesaran, M.H. (2007) ‘‘A Simple Panel Unit Root Test in the Presence of Cross-Section Dependence’’, Journal of Applied Econometrics. 22(2): 265-312.
Rassekh, F. (2007) ‘‘Is International Trade More Beneficial to Lower Income Economies? An Empirical Inquiry’’, Review of Development Economics 11: 159–169.
Redding, S. (1999) ‘‘Dynamic comparative advantage and the welfare effects of trade’’, Oxford Economic Papers, 51(1), 15–39.
Rivera-Batiz, L.A., and P.M. Romer. (1991) ‘‘International Trade with Endogenous Technological Change’’, European Economic Review 35: 971–1001.
Rodrik, D. (2018) ‘‘An African Growth Miracle?’’, Journal of African Economics, 27(1),10-27.
Rogers, W.H. (1994) ‘‘Regression Standard Errors in Clustered Samples’’, Stata Technical Bulletin, vol. 3, issue 13.
Sakyi, D., Villaverde, J., Maza, A. and Chittedi, K.R. (2012) ‘‘Trade Openness, Growth and Development: Evidence from Heterogeneous Panel Cointegration Analysis for Middle-Income Countries’’, Cuadernos de Economia Special Issue, 31 (57): 21–40.
Sakyi, D., Villaverde, J. and Maza, A. (2015) ‘‘Trade openness, income levels, and economic growth: The case of developing countries, 1970–2009’’, The Journal of International Trade & Economic Development, 24:6, 860-882.
Salinas, G., and Aksoy, A. (2006) “Growth Before and After Trade Liberalisation.”, World Bank Policy Research Paper No. 4062. Washington, DC: World Bank.
Squalli, J., and Wilson, K. (2011) ‘‘A New Measure of Trade Openness’’, World Economy 34 (10): 1745–1770.
Spilimbergo, A. (2000) ‘‘Growth and Trade: The North Can Lose’’, Journal of Economic Growth 5 (2): 131–146.
Swamy, P. (1971) ‘‘Statistical Inference in A Random Coeffeicient Regression Model’’, Econometrica 38(2), 311-322.
Tatoğlu, F.Y. (2017) ‘‘Panel Zaman Serileri Analizi’’. Beta Basım Yayım Dağıtım.
Tekin, R.B.(2012) ‘‘Economic growth, exports and foreign direct investment in Least Developed Countries: A panel Granger causality analysis’’, Economic Modelling, Volume 29, Issue 3,Pages 868-878.
White, H. (1980) ‘‘A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity’’, Econometrica. 48,817-838.
Vamvakidis, A. (2002) ‘‘How Robust Is the Growth-Openness Connection? Historical Evidence’’, Journal of Economic Growth 7 (1), 57–80.
Wacziarg, R., and Welch, K.H. (2008) ‘‘Trade Liberalisation and Growth: New Evidence’’, The World Bank Economic Review 22 (2), 187–231.
Wooldridge, J. M. (2002). ‘‘Econometric Analysis of Cross Section and Panel Data’’, Cambridge. MA: MIT Press.
Young, A. (1991) “Learning by Doing and the Dynamic Effects of International Trade.”, The Quarterly Journal of Economics 106 (2), 369–405.
Zahonogo, P. (2017) "Financial Development and Poverty in Developing Countries: Evidence from Sub-Saharan Africa,", International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(1), pages 211-220.

Ayrıntılar

Birincil Dil

İngilizce

Konular

Ekonomi

Bölüm

Araştırma Makalesi

Yazarlar

Murat Çetrez ^*
0000-0001-9567-7644
Türkiye

Yayımlanma Tarihi

24 Temmuz 2022

Gönderilme Tarihi

10 Nisan 2022

Kabul Tarihi

7 Haziran 2022

Yayımlandığı Sayı

Yıl 2022 Cilt: 23 Sayı: 3

DOI

https://doi.org/10.37880/cumuiibf.1101244

IZ

https://izlik.org/JA65CA93XA

Kaynak Göster

RIS / Bibtex

APA

Çetrez, M. (2022). Trade Openness, Income Levels, Economic Growth, and Current Account Balances. Cumhuriyet Üniversitesi İktisadi ve İdari Bilimler Dergisi, 23(3), 760-773. https://doi.org/10.37880/cumuiibf.1101244

Cited By

Determinants of Current Account Balances: Evidence from OECD Countries and the European Debt Crisis

Frontiers in Sustainable Development

https://doi.org/10.54691/w7bde388