Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129093
Authors: 
Krenz, Astrid
Year of Publication: 
2016
Series/Report no.: 
Discussion Papers, Center for European Governance and Economic Development Research 276
Abstract: 
The past literature presents ambiguous evidence about the bidirectional and causal influences between countries´ institutional framework and their trading activity. In our analysis, we investigate the relationship between institutions and trade constructing a measure of institutions from the information given by the International Country Risk Guide and using a methodology that can control for omitted variables bias, endogeneity in the regressors, as well as cross-country heterogeneity. We examine the long-run effects of the political institutional framework on trade for a panel of 87 countries for the period from 1990 to 2007. We employ recent panel econometric methods for testing and estimating in the presence of non-stationarity, investigate panel causality and use methods that are robust to slope heterogeneity. Our results imply that an improved political institutional framework is a cause of increased trading activity.
Subjects: 
political institutions
international trade
panel co-integration
cross-country heterogeneity
JEL: 
F14
C10
Document Type: 
Working Paper

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