Evaluating Trade Liberalization Using Smooth Transitions Analysis

Part of the Case-Studies in Economic Development book series (CASIED)


This chapter is concerned with a new approach (known as smooth transitions analysis) to the analysis of trade liberalization. Although our exposition focuses exclusively upon the use of this new method in the analysis of trade liberalizations there is no reason, in principle, why the method might not be applied more generally in a variety of contexts involving the evaluation of policy reforms of various sorts. Previous studies of the influence of trade liberalizations upon economic growth performance have recognized the possibility that changes in the orientation of trade policies might influence growth via one or both of two channels. The first such channel views exports as one of the arguments of the growth equation and sees trade liberalizations as bringing about increased exports and therefore also increased real output. This is essentially the view adopted by Papageorgiou, Michaely and Choksi (1991) (PMC hereafter) in the large scale study of thirty-six liberalization episodes in nineteen countries that they undertook for the World Bank. The second channel sees trade liberalizations as having the potential to bring about a variety of dynamic changes which give rise to an alteration in the coefficient of the export variable in the growth equation, such that an increase in exports can have a greater growth promoting effect after liberalization.


Smooth Transition Trade Liberalization Real Output Export Variable Real Output Growth 
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© Palgrave Macmillan, a division of Macmillan Publishers Limited 1999

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