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Output and Trade Relation

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Geographical Perspectives on International Trade

Part of the book series: SpringerBriefs in Geography ((BRIEFSGEOGRAPHY))

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Abstract

The impact of openness captured via trade has become a serious issue for several economies. Over the years, there have been an increasing concern and empirical evidence challenging the very export-led growth strategies and also differential and its limited positive impact on economic growth. A number of models exist in the literature to study the causality between foreign sector on the domestic economy and vice-versa. This chapter briefly covers the literature about the changing perspective on the trade and output relationship. Furthermore, an empirical analysis is done to capture causality from the gross domestic product (GDP) to trade with the particular focus on 1990 and 2015. The results revealed that the variation in GDP explained a significant variation in the export values. However, residual mapping did show mixed results across countries. Hence, this chapter also reflects on the fact that besides GDP there are other factors that could affect trade, for example geopolitical environment, labor market conditions, capital inflow, institutions and also economic reforms.

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Notes

  1. 1.

    Global value chains, with the help of concepts like ‘governance’ and ‘upgrading’, explain the ways in which new patterns of global trade, production and employment mould avenues for development and competitiveness (Gereffi 2018).

  2. 2.

    Regression analysis helps in analyzing the statistical association between two (or more) variables. Mukherjee et al. (1998) also pointed out that a regression model only depicts statistical association between two variables, but in itself it cannot establish the direction of causality between them. Whether a causal link exists between two variables and which way the causality runs is a matter which can only be settled by sound theoretical reflection.

  3. 3.

    In bivariate analysis (as to graphics), a simple but powerful tool is the scatter plot (Mukherjee et al. 1998). It is the simplest method of seeing the relationship between two variables by plotting the two variables against each other on a graph.

  4. 4.

    Pal (1998) has pointed out that for mapping residuals should be standardized; this is done by dividing the absolute residuals by their standard deviation, which in this case is the standard error of the estimate. By this the magnitude of the residuals is affected but the relative pattern remains the same.

  5. 5.

    Regression analysis provides a functional relationship by which the value of one variable can be estimated from the value of another variable, and one variable is thus considered as dependent upon the other (Pal 1998).

  6. 6.

    The absolute residual of a particular observation of X or Y does not have much use in research because of the problem of units of measurement when comparing two or more sets of values. In this context, the standardized residual is preferred which expresses the value of the absolute residual in terms of a normal distribution of residuals. Standardized residual bands, like standard error bands, run parallel to the regression lines. Therefore, they do not give undue emphasis to the residuals in Y related to either the large or small values of X (as do absolute residuals) (Pal 1998).

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Authors and Affiliations

  1. Centre for Study of Regional Development, School of Social Sciences, Jawaharlal Nehru University, Delhi, India

    Purva Yadav

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Yadav, P. (2021). Output and Trade Relation. In: Geographical Perspectives on International Trade. SpringerBriefs in Geography. Springer, Cham. https://doi.org/10.1007/978-3-319-71731-9_5

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  • DOI: https://doi.org/10.1007/978-3-319-71731-9_5

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