Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19258
Authors: 
Parikh, Ashok
Year of Publication: 
2004
Series/Report no.: 
HWWA Discussion Paper 286
Abstract: 
The objectives of this paper are to study the impact of liberalisation on trade deficits and current accounts of developing countries. It is expected that trade liberalisation would promote economic growth from the supply side by leading to a more efficient use of resources, by encouraging competition, and by increasing the flow of ideas and knowledge across national boundaries. Trade liberalisation could lead to faster import growth than export growth and hence the supply side benefits may be offset by the unsustainable balance of payments position. This study uses panel data of 42 countries (both time-series and cross-section dimension) to estimate the effect of trade liberalisation and growth on trade balance while controlling for other factors such as income terms of trade. The major finding of the study is that trade liberalisation promotes growth in most cases, (Part 1 of this study) the growth itself has a negative impact on trade balance and this in turn could have negative impacts on growth through deterioration in trade balance and adverse terms of trade. Our conclusion is that trade liberalisation could constrain growth through adverse impact on balance of payments.
Subjects: 
Panel data
Income Terms of Trade
Dynamic Optimisation
Dynamic panel model
JEL: 
F32
C21
F13
C23
C22
F14
Document Type: 
Working Paper

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