The Advantage of Being A Small Country on Economic Growth Spillovers: A Review on Spain and Portugal With ARDL Approach

Abstract

This study investigates Spain's role in Portugal’s economic development and analyzes the assumption that Spain’s import from Portugal is the factor that increases Portugal’s per capita income the most. Apart from these reasons, there are several other motivations to focus on foreign trade between Spain and Portugal. The first is to examine the impact on Portugal of the increases in GDP, exports and imports of Spain, which is the major country and borders Portugal. Second, this study aims to test the growth spread. According to the test results, the economic growth of Spain positively affects the growth of Portugal in the long and short term. In addition, it was concluded that the share of imports has more positive effects than exports in the long run. It shows that the deviation in the variables according to the error correction term result converges to only 85 percent in the t period. The findings are also consistent with previous research supporting the economic integration arguments that emerged as a result of trade relations. In addition, in this direction, the economic and political meetings to be held between the two countries and the actions to be taken as a result of these meetings can create an environment where both countries can win.