Analysis of Trade Openness and Economic Growth in Emerging Markets

Eren ERGEN

doi:10.21919/remef.v21i3.1349

Authors

Eren ERGEN Pamukkale University https://orcid.org/0000-0002-8756-5148

DOI:

https://doi.org/10.21919/remef.v21i3.1349

Keywords:

Trade Openness, Economic Growth, Wavelet

Abstract

The purpose of this research is to analyze the relationship between trade openness and economic growth for 21 emerging markets using the wavelet method. The results demonstrate that trade openness and economic growth are correlated. Furthermore, trade openness stimulates economic growth in 57% of emerging markets. İn addition to, causality is supported in 76% of the emerging markets. The results emphasize the positive impact of trade openness on economic growth in emerging markets. Therefore, the rate and number of customs duties in emerging markets should be reduced. Data availability is scarce, and recommendations depend on the discretion of policymakers. The findings demonstrate that trade has a significant impact on economic growth. The study applies a method frequently used in engineering to economics and produces unique results for emerging markets. Sustainability of both trade and economic growth is possible with policies that will increase low inflation and financial development.

References

Adebayo, T. S. (2020). New insights into export-growth nexus: Wavelet and causality approaches. Asian Journal of Economics, Business and Accounting, 15(2), 32–44. https://doi.org/10.9734/AJEBA/2020/v15i230212

Adebayo, T. S. (2021). Testing the EKC hypothesis in Indonesia: Empirical evidence from the ARDL-based bounds and wavelet coherence approaches. Applied Economics Journal, 28(1), 78–100. https://doi.org/10.22004/ag.econ.334394

Adebayo, T. S., & Beton Kalmaz, D. (2020). Ongoing debate between foreign aid and economic growth in Nigeria: A wavelet analysis. Social Science Quarterly, 101(5), 2032–2051. https://doi.org/10.1111/ssqu.12841

Adebayo, T. S., Sevinc, H., Sevinc, D. E., Ojekemi, O. S., & Kirikkaleli, D. (2024). A wavelet-based model of trade openness with ecological footprint in the MINT economies. Energy & Environment, 35(4), 2178–2197. https://doi.org/10.1177/0958305X221150489

Adeel-Farooq, R. M., Abu Bakar, N. A., & Raji, J. O. (2017). Trade openness, financial liberalization and economic growth: The case of Pakistan and India. South Asian Journal of Business Studies, 6(3), 229–246. https://doi.org/10.1108/SAJBS-06-2016-0054

Arif, A., Sadiq, M., Shabbir, M. S., Yahya, G., Zamir, A., & Bares Lopez, L. (2022). The role of globalization in financial development, trade openness and sustainable environmental-economic growth: Evidence from selected South Asian economies. Journal of Sustainable Finance & Investment, 12(4), 1027–1044. https://doi.org/10.1080/20430795.2020.1861865

Asamoah, L. A., Mensah, E. K., & Bondzie, E. A. (2019). Trade openness, FDI and economic growth in sub-Saharan Africa: Do institutions matter? Transnational Corporations Review, 11(1), 65–79. https://doi.org/10.1080/19186444.2019.1578156

Asghar, N., & Hussain, Z. (2014). Financial development, trade openness and economic growth in developing countries: Recent evidence from panel data. Pakistan Economic and Social Review, 52(2), 99–126. https://www.jstor.org/stable/24398853

Atiq-ur Rehman, M. A., Shaheen, R., & Munir, F. (2021). Impact of trade openness on economic growth in emerging economies: A panel data analysis. Pakistan Journal of Humanities and Social Sciences, 9(2), 210–216. https://doi.org/10.52131/pjhss.2021.0902.01127

Bahmani-Oskooee, M., & Niroomand, F. (1999). Openness and economic growth: An empirical investigation. Applied Economics Letters, 6(9), 557–561. https://doi.org/10.1080/135048599352592

Ben Abdallah, A. (2024). The relationship between trade openness, foreign direct investment inflows, and economic growth in Middle East and North Africa region: Autoregressive distributed lag model vs. vector error correction model. Journal of the Knowledge Economy, 15(1), 1118–1141. https://doi.org/10.1007/s13132-023-01099-x

Cantú Esquivel, J. A., Ríos Bolívar, H., & Jiménez Preciado, A. L. (2023). Causalidad y acoplamiento cíclico entre variables macroeconómicas en la conformación de crisis financieras. Revista Mexicana de Economía y Finanzas, 18(1). https://doi.org/10.21919/remef.v18i1.669

Cerecedo Hernández, D., Franco-Ruiz, C. A., Contreras-Valdez, M. I., & Franco-Ruiz, J. A. (2019). Explosion in virtual assets (cryptocurrencies). Revista Mexicana de Economía y Finanzas, 14(4), 715–727. https://doi.org/10.21919/remef.v14i4.374

Chatterji, M., Mohan, S., & Dastidar, S. G. (2014). Relationship between trade openness and economic growth of India: A time series analysis. Journal of Academic Research in Economics, 6(1), 45–70. http://www.jare-sh.com/downloads/abstract_mar_2014/dastidar.pdf

Dao, A. T. (2014). Trade openness and economic growth. The Park Place Economist, 23(1), 46–62. https://digitalcommons.iwu.edu/israel_economics/2/

Epor, S. O., Yua, H., & Terhemba Iorember, P. (2024). Foreign direct investment and economic growth in developing countries: The role of international trade and foreign debt. Modern Finance, 2(1), 1–17. https://doi.org/10.61351/mf.v2i1.87

Fatima, S., Chen, B., Ramzan, M., & Abbas, Q. (2020). The nexus between trade openness and economic growth: Analyzing the role of human capital accumulation. SAGE Open, 10(4), 1–18. https://doi.org/10.1177/2158244020967377

Harrison, A. (1996). Openness and growth: A time-series, cross-country analysis for developing countries. Journal of Development Economics, 48(2), 419–447. https://doi.org/10.1016/0304-3878(95)00042-9

Hochstein, A. (2017). The Harrod-Domar model in a Keynesian framework. International Advances in Economic Research, 23, 349–350. https://doi.org/10.1007/s11294-017-9639-7

Husnain, M. I. U., Nasrullah, & Khan, M. A. (2021). Testing dependence patterns of energy consumption with economic expansion and trade openness through wavelet transformed coherence in top energy-consuming countries. Environmental Science and Pollution Research, 28(36), 49788–49807. https://doi.org/10.1007/s11356-021-14046-7

Ibragimov, M., Ibragimov, R., & Walden, J. (2015). Heavy-tailed distributions and robustness in economics and finance (Lecture Notes in Statistics, Vol. 214). Springer. https://doi.org/10.1007/978-3-319-16877-7

IMF. (2024). Emerging markets are exercising greater global sway. https://www.imf.org/en/Blogs/Articles/2024/04/09/emerging-markets-are-exercising-greater-global-sway

International Trade Centre (ITC). (2011). New market opportunities in emerging markets. https://www.intracen.org/news-and-events/news/new-market-opportunities-in-emerging-markets

Iyke, B. N. (2017). Does trade openness matter for economic growth in the CEE countries? Review of Economic Perspectives – Národohospodářský Obzor, 17(1), 3–24. https://doi.org/10.1515/revecp-2017-0001

Jun, W., Mahmood, H., & Zakaria, M. (2020). Impact of trade openness on environment in China. Journal of Business Economics and Management, 21(4), 1185–1202. https://doi.org/10.3846/jbem.2020.12050

Kalmaz, D. B., & Kirikkaleli, D. (2019). Modeling CO2 emissions in an emerging market: Empirical finding from ARDL-based bounds and wavelet coherence approaches. Environmental Science and Pollution Research, 26(5), 5210–5220. https://doi.org/10.1007/s11356-018-3920-z

Khalid, M. A. (2016). The impact of trade openness on economic growth in the case of Turkey. Research Journal of Finance and Accounting, 7(10), 51–61. https://core.ac.uk/download/pdf/234631418.pdf

Kong, Q., Peng, D., Ni, Y., Jiang, X., & Wang, Z. (2021). Trade openness and economic growth quality of China: Empirical analysis using ARDL model. Finance Research Letters, 38, 101488. https://doi.org/10.1016/j.frl.2020.101488

Konstantakopoulou, I., & Tsionas, M. G. (2019). Measuring comparative advantages in the Euro Area. Economic Modelling, 76, 260–269. https://doi.org/10.1016/j.econmod.2018.08.005

Kumari, R., Shabbir, M. S., Saleem, S., Yahya Khan, G., Abbasi, B. A., & Lopez, L. B. (2023). An empirical analysis among foreign direct investment, trade openness and economic growth: Evidence from the Indian economy. South Asian Journal of Business Studies, 12(1), 127–149. https://doi.org/10.1108/SAJBS-06-2020-0199

Liu, P. C. (1994). Wavelet spectrum analysis and ocean wind waves. In Wavelet analysis and its applications (Vol. 4, pp. 151–166). Academic Press. https://doi.org/10.1016/B978-0-08-052087-2.50012-8

Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. https://doi.org/10.1016/0304-3932(88)90168-7

Majeed, M. T. (2010). Inequality, trade openness and economic growth in Asia. Applied Econometrics and International Development, 10(2), 201–212. https://mpra.ub.uni-muenchen.de/57772/

Malefane, M. R., & Odhiambo, N. M. (2018). Impact of trade openness on economic growth: Empirical evidence from South Africa. International Economics/Economia Internazionale, 71(4), 387–416. https://www.iei1946.it/article/157/impact-of-trade-openness-on-economic-growth-empirical-evidence-from-south-africa

Marelli, E., & Signorelli, M. (2011). China and India: Openness, trade and effects on economic growth. The European Journal of Comparative Economics, 8(1), 129–154. https://ejce.liuc.it/18242979201101/182429792011080106.pdf

Menyah, K., Nazlioglu, S., & Wolde-Rufael, Y. (2014). Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling, 37, 386–394. https://doi.org/10.1016/j.econmod.2013.11.044

Mercan, M., Gocer, I., Bulut, S., & Dam, M. (2013). The effect of openness on economic growth for BRIC-T countries: Panel data analysis. Eurasian Journal of Business and Economics, 6(11), 1–14. https://www.ejbe.org/EJBE2013Vol06No11p001MERCAN-GOCER-BULUT-DAM.pdf

Monyela, M. N., & Saba, C. S. (2024). Trade openness, economic growth and economic development nexus in South Africa: A pre-and post-BRICS analysis. Humanities and Social Sciences Communications, 11(1), 1–18. https://doi.org/10.1057/s41599-024-03604-2

Mutascu, M. (2018). A time-frequency analysis of trade openness and CO2 emissions in France. Energy Policy, 115, 443–455. https://doi.org/10.1016/j.enpol.2018.01.034

Mutascu, M., & Sokic, A. (2020). Trade openness-CO2 emissions nexus: A wavelet evidence from EU. Environmental Modeling and Assessment, 25(3), 411–428. https://doi.org/10.1007/s10666-020-09689-8

Pavlov, A. N., Hramov, A. E., Koronovskii, A. A., Sitnikova, E. Y., Makarov, V. A., & Ovchinnikov, A. A. (2012). Wavelet analysis in neurodynamics. Physics-Uspekhi, 55(9), 845–875. https://doi.org/10.3367/UFNe.0182.201209a.0905

Perales, G. B., & Borrego-Salcido, C. (2024). Global economic policy uncertainty and global economic leaders’ influence on regional economic growth. Revista Mexicana de Economía y Finanzas, 19(4), 1126. https://doi.org/10.21919/remef.v19i4.1126

Pradhan, R. P., Arvin, M. B., & Norman, N. R. (2015). A quantitative assessment of the trade openness–economic growth nexus in India. International Journal of Commerce and Management, 25(3), 267–293. https://doi.org/10.1108/IJCoMA-08-2013-0075

Rakshit, B. (2022). Dynamics between trade openness, FDI and economic growth: Evidence from an emerging economy. Journal of International Trade Law and Policy, 21(1), 16–41. https://doi.org/10.1108/JITLP-01-2021-0004

Ramzan, M. B. S., Shahbaz, M., Song, J., & Jiao, Z. (2019). Impact of trade openness on economic growth: Does TFP matter? The Journal of International Trade & Economic Development, 28(8), 960–995. https://doi.org/10.1080/09638199.2019.1616805

Sakyi, D., Villaverde, J., & Maza, A. (2015). Trade openness, income levels, and economic growth: The case of developing countries, 1970–2009. The Journal of International Trade & Economic Development, 24(6), 860–882. https://doi.org/10.1080/09638199.2014.971422

Savvides, A. (1995). Economic growth in Africa. World Development, 23(3), 449–458. https://doi.org/10.1016/0305-750X(94)00130-Q

Schumacher, R. (2012). Adam Smith’s theory of absolute advantage and the use of doxography in the history of economics. Erasmus Journal for Philosophy and Economics, 5(2), 54–80. https://doi.org/10.23941/ejpe.v5i2.105

Sghaier, M. I. (2023). Trade openness, financial development and economic growth in North African countries. International Journal of Finance & Economics, 28(2), 1729–1740. https://doi.org/10.1002/ijfe.2503

Solow, R. M. (1957). Technical change and the aggregate production function. The Review of Economics and Statistics, 39(3), 312–320. https://doi.org/10.2307/1926047

Soylu, Ö. B., Adebayo, T. S., & Kirikkaleli, D. (2021). The imperativeness of environmental quality in China amidst renewable energy consumption and trade openness. Sustainability, 13, 5054. https://doi.org/10.3390/su13095054

Tahir, M., & Azid, T. (2015). The relationship between international trade openness and economic growth in the developing economies: Some new dimensions. Journal of Chinese Economic and Foreign Trade Studies, 8(2), 123–139. https://doi.org/10.1108/JCEFTS-02-2015-0004

Torrence, C., & Webster, P. J. (1999). Interdecadal changes in the ENSO–monsoon system. Journal of Climate, 12(8), 2679–2690. https://doi.org/10.1175/1520-0442(1999)012<2679>2.0.CO;2

Udeagha, M. C., & Ngepah, N. (2021). The asymmetric effect of trade openness on economic growth in South Africa: A nonlinear ARDL approach. Economic Change and Restructuring, 54(2), 491–540. https://doi.org/10.1007/s10644-020-09285-6

Ugurlu, E. (2010). Growth and openness relationship in the EU-15: Panel data analysis. Ekonomika, 89(2), 44–54. https://www.redalyc.org/articulo.oa?id=692273740003

Uslu, Ç. L., Aydoğan, E. T., & Ketenci, N. (2015). Economic growth, financial development, and trade openness in emerging markets: Panel approach. MPRA Paper No. 64722. University Library of Munich. https://mpra.ub.uni-muenchen.de/64722/

World Trade Organization (WTO). (2025). Members and observers. https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm

Yavuz, E., Ergen, E., Avci, T., Akcay, F., & Kilic, E. (2024). Do the effects of aggregate and disaggregate energy consumption on different environmental quality indicators change in the transition to sustainable development? Evidence from wavelet coherence analysis. Environmental Science and Pollution Research, 31(60), 67259–67279. https://doi.org/10.1007/s11356-023-30829-6

Analysis of Trade Openness and Economic Growth in Emerging Markets

Authors

DOI:

Keywords:

Abstract

References

Downloads

Published

Issue

Section

License

Language

menú

Make a Submission