Level Of Trade Openness Research Articles

Do credit risks deter FDI? Empirical evidence from the SAARC countries

PurposeThis paper makes a novel attempt to estimate the potential impact of credit risk on foreign direct investment (FDI hereafter), thereby focusing on a completely unexplored area in the existing empirical literature.Design/methodology/approachTo provide a comprehensive understanding of the relationship between credit risk and FDI inflows, the study incorporates all the eight-member economies of the South Asian Association of Regional Cooperation (SAARC hereafter) and analyzes a panel data set, over the period 2011 to 2019, extracted from the World Development Indicators, using the suitable econometric techniques for the efficient estimations of the specified models.FindingsThe results indicate a negative and statistically significant relationship between the credit risk of the banking sectors and FDI inflows. Similarly, market size and inflation rate appear to be the two other main factors behind the increasing FDI inflows in the SAARC member economies. Interestingly, the size of the market became irrelevant in attracting FDI inflows when the Indian economy is excluded from the sample due to its higher economic weight. On the other hand, FDI inflows are not dependent on the level of trade openness, with most of the specifications showing either an insignificant or negative coefficient of the variable.Practical implicationsThe obtained results are unique and robust to alternative methodologies, and hence, the SAARC economies could consider them as the critical inputs in formulating the appropriate policies on FDI inflows.Originality/valueThe findings are unique and original. The authors have established a relationship between credit risk and FDI for the first time in the SAARC context.

State international income position, trade openness, and mass antigovernment protests

This research provides a state-level systemic explanation for antigovernment insurgencies. We posit that state international income position influences antigovernment movements, which effect, however, hinges on the level of trade openness. By analyzing 157 states from 1990 through 2018, it is found that for a state having an unclosed market, its internationally relative income level is negatively associated with mass antigovernment protests. This study implies that trade liberalization may exert a context-specific impact on domestic political insurgency, which helps understand why trade liberalization seems to be a reason for mass anti-government movements in some contexts while enhancing a regime in other cases.

Trade Openness and Environmental Pollution Management: Push or Pull?

Foreign trade, as one of the troika of China's economic development, plays a vital role, bringing great benefits to the country through trade, but also accompanied by a series of environmental problems such as the export industry's carbon emissions increasing year by year and a series of environmental problems. Therefore, to explore the impact of trade openness on the environmental pollution control mechanism has practical and theoretical significance. Based on relevant theories and literature, this paper first combed through the mechanism of trade opening on environmental pollution and found the entry point. Then, based on the panel data of 30 provinces in China from 2007 to 2017, this paper explored the mechanism of trade opening on environmental pollution in the whole country and the eastern, central and western regions of China, and introduced technological innovation intermediary variables to build an intermediary model. The empirical results show that the relationship between the level of trade openness and industrial wastewater emissions is inverted "N", "U" with industrial sulphur dioxide emissions and negative linear with industrial soot emissions; trade openness will exert a mediating effect on environmental pollution control through technological innovation as a mediating variable.

<p>Sectoral Performances and Economic Policy Uncertainty in an Emerging Economy</p>

This study investigates the dynamic interference of economic policy uncertainties on sectoral performances in an emerging economy - Nigeria. This step becomes expedient considering the vulnerability of developing countries to economic shocks and the lack of convincing explanations in previous studies. The dynamic autoregressive distributed lag (DARDL) and Kernel Regularized Least Squares (KRLS) techniques, as well as annual time series for the period 1981 to 2019, were relied upon for empirical expositions. Accordingly, a long-run relationship is established among the performance of each sector and the relevant explanatory variables. Overall, the empirical details reveal time-varying negative and significant effects of uncertainties on the performances of all the sectors, especially, the agricultural and the services sectors. Also, it is established that trade openness is a significant growth inhibitor, suggesting that the vulnerability of Nigeria economy to the waves of uncertainties is heightened by the levels of trade openness. Meanwhile, productivity levels in all the sectors are positive and significant functions of the exchange rate and investments. On this note, policies to shield the local economy from uncertainties must be sensitive to sectoral peculiarities and time variations. However, such efforts will be futile if trade openness is not taken into considerations. Expectedly, these discoveries are equally beneficial to the government, the local and international investors.

Trade openness, job sectors, and social policy preferences: evidence from China

AbstractHow does trade openness affect individuals’ social policy preferences in emerging markets? Drawing upon the theories of economic openness, risk, and social policy preference, we examine how trade openness and job sectors jointly shape preferences on social protection in China, the largest emerging market. Using the World Value Survey (WVS) Wave VI and archival macroeconomic indicators in 2012, we find that trade openness is associated with higher demands for government responsibility in social protection. We also find, compared with public-sector employees, private-sector employees exhibit lower levels of support to the role of government in social protection. The public–private divide in policy preferences, nevertheless, diminishes in regions with high levels of trade openness. This research provides new evidence to the risk-model of social policy preferences in the Chinese context. It also highlights the importance of considering the significant differences between public and private-sector employees in their social policy preferences.

Factors of Environmental Degradation and Economic Growth in Vietnam: The Role of Innovation

The purpose of the study is to empirically examine the interaction between innovation, energy consumption, trade openness, urbanization, economic growth and the emission of carbon dioxide in Vietnam during 1986-2020. The article contributes to the assessment of impact of technological innovation on carbon emission in Vietnam that has not yet been examined. Firstly, the article shows the negative interrelation between technological innovation and carbon emission in Vietnam. Secondly, this research evidences the existence of the pollution haven hypothesis having shown that trade openness has led to the environmental deterioration in Vietnam. Thirdly, the author revisits the environmental Kuznets curve hypothesis and provides evidence that economic growth in Vietnam starts to enhance the environmental quality. Fourthly, energy consumption increases the environmental deterioration while urbanization seems not to be blamed. Besides increasing government investment in innovation, policy makers should consider the country’s level of trade openness and energy consumption instead of urbanization and economic growth when formulating policies to reduce environmental deterioration in Vietnam.

Is trade openness a carrier of knowledge spillovers for developed and developing countries?

The present study examines a database of 58 countries for a period of 45 years to assess whether trade openness can operate as a technology transfer channel. The examination has a twofold purpose: determining the impact of openness on total factor productivity and verifying whether this relationship holds for low-income and emerging countries. Employing the generalized method of moments for a data-panel model (System GMM), the analysis focuses on domestic and foreign knowledge capital stocks and level and variation of openness, among other variables. The results indicate that the level of trade openness does not affect productivity growth, though its variation rate has temporary positive effects on total factor productivity. However, for high- and middle-income countries, the openness level affects productivity positively. In the case of low-income and emerging countries, however, openness affects productivity growth negatively even when the degree of openness interacts with domestic knowledge stock.

Food Security, Agricultural Sector Resilience, and Economic Integration: Case Study of ASEAN+3

The issue of food security has been increasingly critical in many parts of the world. In many countries people are facing food crisis and it has severe impact on their economies. Ensuring food security has become a global challenge with various dimensions. This study aims to examine the impact of intraregional trade on food security in the Association of Southeast Asian Nations (ASEAN) and three additional countries (China, Japan, South Korea), known as ASEAN+3. Using panel data regression analysis, the results show that intraregional trade and the level of trade openness have positive and significant effect to increase food security as it increases food production level in ASEAN+3 countries. In pursuing food security, ASEAN needs to enhance and accelerate its future cooperation agenda. The ASEAN member countries need to support the realization of ASEAN vision 2025, which will create a more dynamic and resilient ASEAN, capable of responding and adapting to various challenges through robust national and regional mechanisms to overcome various issues, including food security.

Economic openness, government efficiency, and urbanization

AbstractWe develop a theoretical model of the impact of economic openness and government efficiency on urbanization. The theoretical model is supplemented with the Malmquist–Luenberger index of Super‐slack‐based measure with undesirable outputs and dynamic panel data model. The empirical models use data collected from 30 provinces in China from 2004 to 2017. Results indicate that improvement in the level of trade openness in an urban area can increase the urban population. The improvement in government efficiency in an urban area can also increase the urban population. Regional trade openness can effectively promote regional migration. Trade openness has a mediation effect between government efficiency and migration. We also find that trade openness favors female rather than male migration to urban areas.

Trade Openness and Economic Growth in Nepal

This study examines the impact of trade openness on economic growth in Nepal over the period 1975-2019. Using ARDL bounds testing approach to co integration in the multivariate framework, the study results reveal that there exists a long-run relationship between Nepal’s foreign trade and economic growth over the study period. The long-run estimates of ARDL models how that the level of trade openness in Nepal predicts the rate of economic growth of the country positively and significantly in the long-run. The study also reports the positive and significant long run effect of investment level on growth in Nepal over the study period supporting the trade induced investment growth hypothesis. It postulates that trade openness affects economic growth through the channel of investment. The growth enhancing role of trade openness implies that Nepal Government should promote international trade by eliminating trade barriers and making the procedures of foreign trade simple and convenient. Besides, Nepal’s import policy should promote investment environment particularly in capital intensive sectors to take the advantage of technology transfer from technologically advanced country. Furthermore, Nepal should pay proper attention and come up with effective human resource development policy that can uplift human knowledge and skills to make use of technologies from developed countries.

The nonlinear effect of population aging on carbon emission-Empirical analysis of ten selected provinces in China

Existing related researches have focused on the linear relationship between population aging and carbon emissions, which easily lead to partial understanding of the effect of population aging on carbon emissions. In order to more comprehension of the effect of population aging on carbon emissions, this study explores the nonlinear relationship between population aging and carbon emission through empirical analysis of ten selected provinces in China from 2000 to 2016 using the panel threshold model. In the proposed panel threshold model, carbon emission is set as the explained variable, population aging is set as the core explanatory variable, the levels of population aging and trade openness are set as threshold variables, the levels of economic development, energy consumption structure, industrial structure, and technological innovation are set as the controlling variables, respectively. The results show that population aging has a threshold effect on curbing carbon emission. The levels of population aging and trade openness are two key factors that affect the relationship between population aging and carbon emission. Whether the level of popultion aging is lower or higher than the threshold value of 0.12937, the population aging has a negative coefficient on carbon emissions. Moreover, the higher the level of population aging, the greater the offsetting effect of population aging on carbon emission. When the level of trade openness is below the threshold value of 0.30990, the effect of population aging on carbon emission is negligible. When the level of trade openness is higher than the threshold value of 0.30990, the offesetting effect of population aging on carbon emission begins to appear. In other words, population aging has an offsetting effect on carbon emission when trade openness is in relatively high level, whereas the offsetting effect disappears when trade openness is lower than threshold value.

The Impact Of Financial Liberalization On Economic Risk In The Asia Pacific Countries

In this study, we analyze the non-linear effect of financial liberalization policy toward the economic risk of the Asia Pacific countries with trade openness as a threshold variable. To do that, we apply the panel regression threshold proposed by Hansen (1999) as our method of analysis. Based on yearly data from 1975 – 2015, we find that there is a non-linear effect of financial liberalization on economic risk depending on the certain level of trade openness. Regarding this finding, we find that when the trade openness is below the threshold value, financial liberalization policy can reduce the economic risk of Asia Pacific countries. However, when the trade openness exceeds the threshold value, financial liberalization will increase the economic risk. So that, we conclude that an open domestic financial market that is followed by high degree of trade openness will tend to create an economic instability. Keywords: Financial Liberalization, Trade Openness, Economic Risk, Volatility

Does Financial Integration Matter for Financial Development? Evidence from the East Asian and Pacific Region

This paper assesses the impact of financial integration on financial development and establishes thresholds for materializing gains of financial advances from financial globalization using a sample of 34 countries from the East Asian and Pacific region. Following the approaches of Kose et al. (2011) and Asongu and De Moor (2016), we test non-linearity within the financial openness and financial development nexus through semi-parametric ordinary least-squares regression, and then, we develop threshold dynamics models. According to our findings, the effect of financial integration on financial development significantly changes across different financial inflows. When using external debt as a proxy for financial openness, there exists a robust significant inverted U-shaped relationship between financial integration and financial development. The empirical findings also suggest that the financial integration-development nexus is contingent on the level of trade openness, national income, and institutional quality. The results are robust to different measures of financial development and integration, the inclusion of other determinants of financial development, and considerations of endogeneity.

On the link between financial market inclusion and trade openness: An asymmetric analysis

This study investigates the impact of financial market inclusion, the existence of shadow economy and real output on trade openness for a select group of emerging economies. Trade openness potentially is a major source of economic growth and development. This study is the first employing mixed methods and approaches of Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) to estimate the long-run and short-run models for a large group of emerging economies. The more advanced the financial market inclusion is in a country, the higher the financial market development and, eventually, the level of trade openness. This paper examines the asymmetry cointegration approach in line with nonlinearity attribution, using annual data from 1983 to 2014 for 18 emerging economies. Estimate from all models indicate that financial market inclusion has played a significant role in the short run and has symmetric effects on the trade openness of the majority of emerging economies. Also, the nonlinear model and asymmetry cointegration provide more backing.

Impacto del comercio y el transporte internacional sobre la calidad ambiental: un estudio en países de América Latina y el Caribe

<p>This paper explores the effect of trade liberalization and international transport on carbon dioxide (CO<sub>2</sub>) emissions in 18 countries of Latin America and the Caribbean for the period 1995-2013. The results indicate that an increase in the levels of trade openness has a greater effect for high-income countries (0.17 %) than for the others (0.067 %). While it is observed that an increase of 1 % in the tons transported per kilometer increases CO<sub>2</sub> emissions by 0.022 % (high-income countries) and by 0.014 % (middle-high income countries).</p>

Dealing with Time-Inconsistency: Inflation Targeting vs. Exchange Rate Targeting

Abandoning an objective function with multiple targets and adopting single mandate can be an effective way for a central bank to overcome the classic time-inconsistency problem. We show that the choice of a particular single mandate depends on an economy’s level of trade openness and the credibility of the central bank. We begin with reduced form empirical results which show that as central banks become less credible they are more likely to adopt a pegged exchange rate, and crucially, the tendency to peg depends on trade openness. Then in a model where the central bank displays “loose commitment” we show that as central bank credibility falls, they are more likely to adopt either an inflation target or a pegged exchange rate. A relatively closed economy would adopt an inflation target to overcome the time-inconsistency problem, but a highly open economy would prefer an exchange rate peg.

Dealing with Time-Inconsistency: Inflation Targeting vs. Exchange Rate Targeting

Abandoning an objective function with multiple targets and adopting a single mandate can be an effective way for a central bank to overcome the classic time-inconsistency problem. We show that the choice of a particular single mandate depends on an economy’s level of trade openness and the credibility of the central bank. We begin with reduced form empirical results which show that as central banks become less credible they are more likely to adopt a pegged exchange rate, and crucially, the tendency to peg depends on trade openness. Then in a model where the central bank displays “loose commitment” we show that as central bank credibility falls, they are more likely to adopt either an inflation target or a pegged exchange rate. A relatively closed economy would adopt an inflation target to overcome the time-inconsistency problem, but a highly open economy would prefer an exchange rate peg.

The finance–trade nexus revisited: Is the global trade slowdown also a financial story?

This paper studies the role of non-linearities in the finance–trade nexus. While we confirm the positive impact of financial development on the level of trade openness, our findings reveal that the marginal effect decreases considerably with the size of the financial sector. The study contributes to two different strands of the economic literature: First, while widely examined in the finance–growth nexus literature, the discovered non-linearities have been neglected so far in studies on the link between finance and trade. Second, the diminishing marginal effect of finance appears to be an important factor in explaining the recent slowdown in global trade growth.

Does Foreign Direct Investment Accelerate the Vietnamese Economic Growth?: A Simultaneous Equations Approach

The main purpose of this paper is to investigate the impact of foreign direct investment (FDI) on economic growth in Vietnam over the five-year post-crisis period of 2010-2014. In addition, it also provides a comparative analysis with the pre-crisis period to yield greater insight into how the FDI-growth nexus evolved over time and under different economic conditions. Our empirical work is based on a panel data set containing 63 provinces in Vietnam. We start our analytical section by examining the FDI-growth relationship using two simple ordinary-least-square (OLS) models, where FDI and economic growth are the dependent variables and are regressed on a number of other factors that seemingly influence FDI and growth. With an awareness of the possible endogeneity bias, we re-estimate our model using the simultaneous equation approach, employing the two-step system generalized method of moment (GMM) estimator. We complement our study by re-estimating the model on the pre-crisis sample during the period 1999-2006. Then, we re-run our regressions on the full-sample setting and take into account the possible effect of the 2007/2008 crisis by incorporating the crisis dummy variables (D2007 and D2008) to shed more light on the impact of the crisis on FDI and economic growth. Overall, we find some evidence of the simultaneous relationship: increased inward FDI promotes economic growth, while at the same time, greater growth could help the country to attract additional FDI capital. However, this bi-directional relationship only existed in the post-crisis period, and not in the pre-crisis time. During the pre-crisis period, growth does not exhibit a significant impact on FDI, while FDI is found to be an important driver of growth. In our full-sample setting, we find a robust positive significant influence of FDI on economic growth. However, economic growth, again, does not exhibit a significant positive impact on FDI. Some other factors, including domestic investment, market size, exports, level of trade openness and infrastructure development, either promote economic growth or inward investment. We also find some evidence suggesting that Vietnam should invest more in human capital to obtain a sufficient absorptive capability in order to benefit from advanced technologies and knowledge transfers that accompany inward FDI. In the end, our empirical findings suggest that the country should implement a more ‘open door’ policy to exploit further benefits from additional FDI inflows.

Why Asia and China have lower urban concentration and urban primacy

ABSTRACTAsia is densely populated and home to most of the world's megacities. However, its urban primacy and urban concentration, especially those of developing Asia, are much lower than their counterparts in the rest of the world. This is an important puzzle that has not been addressed in the literature. Motivated by a theory of Krugman and Livas Elizondo, this paper attributes the lower urban concentration and urban primacy to higher levels of trade openness in Asia. Empirical evidences are provided using panel data from developing countries in Asia, from the rest of the developing world, and from China.