The relationship between international trade openness and economic growth in the developing economies

Abstract

Purpose – This paper aims to establish a relationship between trade openness and economic growth in the context of the developing countries. This study has proposed a new measure of trade openness to the literature, as the available measures are flawed. Design/methodology/approach – Empirical analyses are carried out with the help of panel econometric techniques. Findings – The main finding of the paper is that the relationship between trade openness and economic growth is positive and statistically significant for developing countries. Besides trade openness, other determinants of economic growth such as investment and labour force are also significantly related with economic growth and carry expected coefficients. Further, it is found that frequent fluctuations in prices are detrimental to long-run economic growth. Practical implications – Therefore, the developing countries are suggested to speed up the process of trade liberalization and also pay favourable attention to other determinants of economic growth to achieve high economic growth. Originality/value – The authors have used a new measure of trade openness apart from the conventional trade volume measure of trade openness.