| While common sense would indicate that trade and growth are positively correlated, it is not clear, both from theoretical and empirical perspectives, whether or not trade is a proximate determinant of economic growth. We try to elucidate the ambiguities in the literature, by studying the nexus between trade share and growth by comparing three different groups of countries: historical EEC, the extreme case of CAAEA customs union, and a group of European transitional economies (TEs) (largely now in the EU). Our main finding, by applying static and dynamic panel estimators, is that the coefficient of real openness has the incorrect sign for the former two samples but has the correct sign for the third. The positive link between openness and growth for the last group of countries is robust to changes in the empirical indicator of openness in the growth regressions (inter and infra-industry trade indicators). |
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