Economic Growth and Trade Openness: A Case of ASEAN 9
Economic Growth and Trade Openness: A Case of ASEAN 9

Summary/Abstract: A popular opinion amongst economists is that trade openness leads to the economic growth of a country. However, this relationship is not that straightforward and sometimes inconclusive as well. While the theoretical literature states that opening up an economy increases trade, leading to the country’s economic growth, the empirical findings greatly differ in many cases. This paper explores the impact that trade openness has on the economic growth of select ASEAN countries from 2008 to 2019. For this purpose, first, panel unit root tests have been employed to find out the stationarity of data. Then Pedroni and Kao residual cointegration tests are used to examine the long-run relationship between variables such as Gross Domestic Product (GDP), Gross Fixed Capital Formation (GFCF), Labour Force (LF), and Trade Openness (TO). Finally, long-run estimations have been conducted through FMOLS and DOLS and the causality of the panel is studied through the Dumitrescu Hurlin panel causality test. Our results show that trade openness has a positive impact on the economic growth of select ASEAN countries in the long run.

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