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International trade and economic growth: evidence from a panel ARDL-PMG approach

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Abstract

The purpose of this work is to study the impact of trade openness on the economic growth of the countries bordering the Mediterranean using a panel of eight countries from 1975 to 2016. We apply ARDL panel which is a technique recently developed. We study the effects of openness to international trade on economic growth while incorporating economic policy variables. The results show that the variables of commercial and financial openness favor economic growth. The free trade agreements that the European Union has signed with certain countries in the Mediterranean basin are designed above all to encourage greater regional economic integration and an increase in their potential growth. Therefore, our findings show that the financial sector is slow to affect economic growth in these countries. This study reveals that human capital and the investment rate support the economic growth of our sample. In addition, we conclude that a process of economic convergence has begun in these countries. A causal analysis was carried out we found an unidirectional causality ranging from economic growth to trade openness.

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Notes

  1. The author takes from the model of Grossman and Helpman (1991), the idea that the technological level in the country of North appreciates at the rate of the research and that that of country of the South depends on an activity of good imitation market.

  2. These two vectors of technology transfer are not, in principle, not far from each other, since foreign investment flows can take the form of imported products.

  3. The size of the two partner countries in terms of population and country size, the distance between the two capital and the fact that they share a common border, are the determinants mentioned by Frankel and Romer (1999). The latter propose to calculate the geographical component of total trade and to use it as an instrument in growth regressions.

  4. For a broad empirical review of these models, see the article by Rodriguez and Rodrick (2000).

  5. These indexes are the Sachs and Warner (1995) opening index, the World Bank's (1987) opening-out index, the Leamer (1988) opening index, the black market, the average import duty on manufactured goods, the scope of non-tariff barriers, the Trade Distortion Index of Heritage Foundation, the ratio of the product of the taxes on trade, the index of Wolf (1993) distortion of imports.

  6. The countries used in this study are: Egypt, Greece, Italy, Morocco, Portugal, Spain, Tunisia and Turkey.

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Authors and Affiliations

  1. Higher Institute of Management, University of Gabes, Gabes, Tunisia

    Wajdi Bardi

  2. Faculty of Economic Sciences and Management of Mahdia, University of Monastir, Mahdia, Tunisia

    Mohamed Ali Hfaiedh

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  1. Wajdi Bardi
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  2. Mohamed Ali Hfaiedh
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Correspondence to Wajdi Bardi.

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Bardi, W., Hfaiedh, M.A. International trade and economic growth: evidence from a panel ARDL-PMG approach. Int Econ Econ Policy 18, 847–868 (2021). https://doi.org/10.1007/s10368-021-00507-4

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