The trade/GDP ratio as a measure of openness

Michael Bleaney and Mo Tian

No 2022-01, Discussion Papers from University of Nottingham, GEP

Abstract: The ratio of trade to GDP is often used as a summary measure of a country’s openness to the rest of the world. It is well known that the trade/GDP ratio is affected by relatively time-invariant factors, such as country size and remoteness from trading partners, that can largely be controlled for in cross-country panels by using country fixed effects. It is shown here that there are also other important, time-varying influences on the trade/GDP ratio that have been little investigated, such as the prices of commodity exports and imports, the real effective exchange rate and the ratio of investment to GDP. These factors are shown to be significant, and not only in the short run, and need to be taken into account in estimating the long-run effects of transport costs or trade policy on the trade/GDP ratio.

Keywords: trade openness; real exchange rate; commodity prices; investment (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-int and nep-sea
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Related works:
Journal Article: The trade‐GDP ratio as a measure of openness (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:2022-01

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