The role of international trade and financial integration in the development model of the BRIC economies

Abstract

This study aims at examining the role of the international trade and financial integration behind the impressive economic growth rates of the BRIC economies. It employs a Barro-type growth model encompassing several robust correlates of economic growth and alternative measures of international trade and financial openness. The estimation rests on a testing down procedure applied to a dynamic panel model based on four-year non-overlapping averages for 88 countries during the 1973–2008 period. The empirical results provide consistent evidence of growth-conducive effects of the international trade integration in addition to the conventional determinants. However, no statistically discernible effect on economic growth of the de facto measures of international financial integration is identified, lending support to the argument that the benefits may be indirect.