Trade Liberalisation, Economic Crises and Growth

26 Pages Posted: 21 Apr 2008

See all articles by Rod Falvey

Rod Falvey

Bond University - Department of Economics

Neil Foster-McGregor

UNU-MERIT

David Greenaway

University of Nottingham - School of Economics

Date Written: April 2008

Abstract

Many economic reforms are undertaken at a time of economic crisis. But is this a good time to undertake trade reform? In this paper we investigate whether an economic crisis at the time of trade liberalization affects a country's subsequent growth performance. We employ threshold regression techniques on five crisis indicators commonly used in the literature, to identify the relevant "crisis values" and to estimate the differential post-liberalization growth effects in the crisis and non-crisis regimes. We find that the post-liberalization growth depends on the characteristics of the crisis. Broadly speaking, an internal crisis implies lower growth and an external crisis higher growth relative to the non-crisis regime. These effects appear to be present in both the short and longer runs.

Keywords: Trade liberalisation, Growth, Crises

JEL Classification: F14, 040

Suggested Citation

Falvey, Rod and Foster-McGregor, Neil and Greenaway, David, Trade Liberalisation, Economic Crises and Growth (April 2008). Available at SSRN: https://ssrn.com/abstract=1123501 or http://dx.doi.org/10.2139/ssrn.1123501

Rod Falvey (Contact Author)

Bond University - Department of Economics ( email )

Bond University - Department of Economics
Gold Coast, Queensland 4229
Australia

Neil Foster-McGregor

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

David Greenaway

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 5469 (Phone)
+44 115 951 4159 (Fax)

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