Trade and Growth in East Asian Countries: Cause and Effect?

David Romer and Teresa Cyrus. Jeffrey A. Frankel
Authors registered in the RePEc Author Service: David Romer () and Jeffrey Alexander Frankel ()

No C95-050, Center for International and Development Economics Research (CIDER) Working Papers from University of California at Berkeley

Abstract: Estimates of growth equations have found a role for openness, particularly in explaining rapid growth among East Asian countries. But major concerns of simultaneous causality between growth and trade have been expressed. This study aims to deal with the endogeneity of trade by using as instrumental variables the exogenous determinants from the gravity model of bilateral trade, such as proximity to trading partners. Our preliminary finding is that the effect of openness on growth is even clearer when we correct for the endogeneity of openness than in standard OLS estimates. We conclude with estimates of how much has been contributed to East Asian growth by openness (both the exogenous or geographical component of openness and the residual or policy component).

Date: Written 1995-06-01

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Related works:
Working Paper: Trade and growth in East Asian countries: cause and effect? (1995)
Working Paper: Trade and Growth in East Asian Countries: Cause and Effect? (1996)
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