Determinants of Economic Complexity in Transitional Economies

Birol Erkan () and Fatih Ceylan ()

Journal Transition Studies Review, 2021, vol. 28, issue 2, 57-80

Abstract: Which country is more developed? Which country's foreign trade policies are more rational? In a globalized world, which country has higher added value and competitiveness in its exports? Questions like this are not easy to answer. Because there are many criteria for measuring the development of the economy and foreign trade of countries. In this context, an important index called The Economic Complexity Index (ECI) was created by Hidalgo and Hausmann to measure and compare the development of the country's economies and foreign trade. For this purpose, we test whether economic growth, foreign direct investment, Human Development Index, Economic Freedom Index cause economic complexity, vice versa in this study. We analyze annual data for the period 1996-2017 for 22 countries called Transitional Economies using the panel causality method. Considering all of Transitional Economies, according to the results of the Bootstrap Granger causality test, we were not able to determine a Granger causality relationship between economic growth, foreign direct investment, Human Development Index, Economic Freedom Index and Economic Complexity Index. However, when we consider country-specific variables defined as Transitional Economies, we identify both one-way and two-way Granger causal relationships in some countries between economic growth, foreign direct investment, Human Development Index and Economic Freedom Index, and Economic Complexity Index. Therefore, some Transitional Economies need to increase their level of economic complexity to get a larger share from global added value and increase their competitiveness. In this context, economic complexity needs to be taken more seriously by both scientists and policymakers, and decision-makers.

Keywords: Economic Complexity; Human Development Index; Economic Freedom Index; Bootsrapt Panel Granger Causality; Transitional Economies (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://transitionacademiapress.org/jtsr/article/view/408/263 (application/pdf)
Access to full texts is restricted to Journal Transition Studies Review

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ase:jtsrta:v:28:y:2021:i:2:p:57-80:id:408

Access Statistics for this article

More articles in Journal Transition Studies Review from Transition Academia Press
Bibliographic data for series maintained by Giorgio Dominese ().