REGULAR ARTICLE
Relationship between trade openness and economic growth in Latin America: A causality analysis with heterogeneous panel data
Adolfo Roquez-Diaz,
Lorenzo Escot,
Adolfo Roquez-Diaz
Faculty of Economics, Complutense University of Madrid, Spain
Search for more papers by this authorCorresponding Author
Lorenzo Escot
Faculty of Statistical Studies, Complutense University of Madrid, Spain
Correspondence
Lorenzo Escot, Faculty of Statistical Studies, Complutense University of Madrid, Av. Puerta de Hierro, num. 1, 28040, Madrid, Spain.
Email: [email protected]
Search for more papers by this authorAdolfo Roquez-Diaz,
Lorenzo Escot,
Adolfo Roquez-Diaz
Faculty of Economics, Complutense University of Madrid, Spain
Search for more papers by this authorCorresponding Author
Lorenzo Escot
Faculty of Statistical Studies, Complutense University of Madrid, Spain
Correspondence
Lorenzo Escot, Faculty of Statistical Studies, Complutense University of Madrid, Av. Puerta de Hierro, num. 1, 28040, Madrid, Spain.
Email: [email protected]
Search for more papers by this authorAbstract
We empirically analyze the causality relationship between economic growth and international trade using new advancements in the econometric methodology for heterogeneous panel data applied to Latin American countries. First, we test for dependencies between the units of cross-section (countries) and then we test for cointegration between growth and openness. Finally, we test for Granger causality using a heterogeneous panel data test. The results reject the hypothesis of general, unidirectional, and homogeneous relationship between trade openness and economic growth in Latin American countries as a group. However, considering heterogeneity, we found significant evidence of causality from trade liberalization to economic growth in Chile, Peru, Nicaragua, and Uruguay; we have found bidirectional causality in Mexico and Honduras; and a causal relationship from economic growth to trade liberalization in Colombia, Costa Rica, Guatemala, and the Dominican Republic.
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