Evaluating Trade Liberalization Using Smooth Transitions Analysis
- 76 Downloads
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.
KeywordsSmooth Transition Trade Liberalization Real Output Export Variable Real Output Growth
Unable to display preview. Download preview PDF.
- Baysan, T. and C. Blitzer (1991), ‘Turkey’, in Papageorgiou, D., Michaely, M. and Choksi, A. (eds), Liberalizing Foreign Trade, Volume 6, Oxford: Basil Blackwell, pp. 263–405.Google Scholar
- Granger, C. and T. Terasvirta (1993), Modelling Nonlinear Economic Relationships, London and New York: Oxford University Press.Google Scholar
- Greenaway, D., S. Leybourne and D. Sapsford (1997a), ‘Trade Liberalization and Growth’, in S. Gupta and N.K. Choudhry (ed.) Growth, Equity and Sustainability: Studies in Globalization and Development (Vol. 1), Dordrecht: Kluwer.Google Scholar
- Krueger, A. (1978), Foreign Trade Regimes and Economic Development: Liberalization Attempts and Consequences, Cambridge, MA: Ballinger for NBER.Google Scholar
- Lin, C. and T. Terasvirta (1992), ‘Testing the Constancy of Regression Parameters Against Continuous Structural Change’, (mimeo) Department of Economics, University of California, San Diego.Google Scholar
- Maddala, G.S. (1977), Econometrics, London and New York: McGraw-Hill.Google Scholar
- Papageorgiou, D., M. Michaely and A. Choksi (1991), Liberalizing Foreign Trade (7 vols), London and New York: Oxford University PressGoogle Scholar