How Does Trade Openness Influence Budget Deficits in Developing Countries?

Jean-Louis Combes and Tahsin Saadi Sedik ()

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Abstract: This paper analyses the effects of trade openness on budget balances by distinguishing the effects of natural openness from those of trade policy. Revealed indicators of natural openness and trade policy are computed. Using GMM-system estimator, the econometric analysis focuses on 66 developing countries over 1974-1998. The results show that trade openness increases a country's exposure to external shocks. This enforces the negative impact on budget balances of terms of trade instability. Additionally, trade openness influences budget balances through several other channels

Date: 2006
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Published in The Journal of Development Studies, 2006, Vol 42, n° 8, pp.1401-1416

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Related works:
Journal Article: How does trade openness influence budget deficits in developing countries? (2006)
Working Paper: How Does Trade Openness Influence Budget Deficits in Developing Countries? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00023333

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