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The empirics of trade and growth: where are the policy recommendations? - Klaus Wälde and Christina Wood

Klaus Wälde (Directorate-General for Economic and Financial Affairs) and Christina Wood (The World Bank)

The empirics of trade and growth: where are the policy recommendations? - Klaus Wälde and Christina Woodpdf(380 kB) Choose translations of the previous link 

Existing literature repeatedly documented a strong correlation between trade and growth. It has also shown a causal effect of imports (though not necessarily exports) on growth in simultaneous equation models but to a lesser extent in Granger-causality tests. Export and import taxes have sometimes been found to negatively affect growth.

Drawing policy conclusions from these general findings for a particular country is difficult not only because of the contradictory results but also because of potential second best world effects and the implied endogeneity of trade policy. Policy recommendations for a specific country require a careful analysis of market and institutional arrangements and can not be based on the existing cross-country literature.

(European Economy. Economic Papers. 204. May 2004. Brussels. 19pp. Tab. Free.)

KC-AI-04-204-EN-
ISBN: 92-894-5969-7
ISSN: 1016-8060

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