The document examines the relationship between average GDP growth and average trade openness across different world regions from 1980 to 1990. For the world as a whole, the relationship is positive but dispersed. In Asia, the two factors are highly countercyclical. In Latin America, they are initially procyclical but become countercyclical after 1985. Charts are presented to illustrate these trends.
The document examines the relationship between average GDP growth and average trade openness across different world regions from 1980 to 1990. For the world as a whole, the relationship is positive but dispersed. In Asia, the two factors are highly countercyclical. In Latin America, they are initially procyclical but become countercyclical after 1985. Charts are presented to illustrate these trends.
We can see that average GDP growth is not completely procyclical with average trade openness, as some free market proponents might have thought. In fact, one might wonder if there is any relationship at all.
Average Growth & Average Trade Openness Growth
1979 0.10 1980 1987 0.08 1988 1978
Average GDP Growth
0.06
1981 0.04 1985 1976 1991
1986
1977
1984
0.02
1992 0.00 1982
-0.02
1990 1989 1983 0.01 0.02 0.03 0.04 0.05
Average Trade Openness Growth
Here we can see more of a positive relationship between average trade openness and average growth. But the relationship is still dispersed. Notice many of the values in the upper right hand corner are earlier years.
Decomposition of Regional GDP and Trade Openness Growth
Time Series for Asia
0.12 Average Growth Rate 0.06 0.08 0.10
Baseline Growth
0.02
0.04
Trade Effect 0.00
1980
1985 Year
1990
Here we see that the two are very countercyclical two each other. Moreover, the growth rates are extremely volatile.
Time Series for Latin America
0.10
Baseline Growth Average Growth Rate 0.05
Trade Effect 0.00 -0.05
1980
1985 Year
1990
Here, the two seem to be highly procyclical early on but then turn countercyclical after 1985.
