Trade Openness Research Articles

Financial Development and Income Inequality: The Case of Ecuador

Financial development, characterized by the growth and sophistication of the financial system, is crucial for the global economy, since it facilitates investment, savings and the efficient allocation of resources, in addition to contributing to the reduction of poverty and inequality by allowing, broader access to financial services. Ecuador has experienced significant changes in its financial system during recent decades, such as dollarization, liberalization, digitalization, diversification of services, and strengthening of regulation and supervision. The research focuses on establishing the influence of financial development on income inequality. The autoregressive distribution of lags (ARDL) methodology was used with the purpose of identifying short- and long-term relationships. The variables included are the Gini index, financial development, financial instability, public social spending, and final consumption spending by resident households, trade openness and gross fixed capital formation. After applying the ARDL model, the main results show that credit allocation to the private sector plays a significant role in reducing income inequality, and its effect intensifies over time.   Received: 22 October 2023 / Accepted: 9 April 2024 / Published: 5 May 2024

The Impact of Trade Openness, Tariff, and Globalization on Food Security in the ASEAN Region

In 2023, many crises hit the world due to heated geopolitical conditions resulting from the war in Russia and Ukraine; the world situation was fragmented because of competition between the USA and PRC blocs, economic recovery due to COVID-19 was shaken again, and food inflation was soaring high. The leading cause of food insecurity in ASEAN, which consists of most developing countries, is the lack of distribution access due to the affordability of logistics and food supplies. Most investors shift their investment preferences from the primary sector to manufacturing due to the volatility and high risk of assets. In 2020, in Asia, there were 78.7 million toddlers who were stunted, with the second majority in Southeast Asia (27.40%). Although most of the ASEAN member countries are connected geographically, the market share of ASEAN member countries in world trade is only 8.8%, so intra-trade relations are considered not optimal enough. This study aims to analyze the effect of three different trade openness indicators (trade openness, tariffs, and globalization) on the food security of Southeast Asian people in 2000–2021. The method used in this research is panel data, which combines pool least squares (PLS) and fixed effect models (FEM) by developing Beck and Katz’s two panels corrected standard errors (PCSE): cross-section weights and SUR. Trade openness significantly affects the two pillars of food security: stability and utilization, with U-shaped results. Ad-valorem tariffs are significant and positive for the two pillars of food security: availability and utilization. Increasing taxes in Southeast Asia can improve the average dietary energy supply’s adequacy; however, this can also increase the prevalence of stunting in children under five. It happens because the availability of abundant food in terms of quantity differs from the quality and safety of its consumption. The increase in globalization from an economic, political, and social perspective in Southeast Asia is significant for the four pillars of food security; if globalization is increased, then this can positively impact reducing cases of stunting and malnutrition; on the other hand, increasing globalization has harmed food availability and stability. Increasing one policy has a different impact. In the first stage, policy improvements can positively impact a pillar of food security. However, after reaching a turning point, there is a possibility that the increased policy will harm the other pillars. Therefore, it is necessary to choose an integrative policy trade-off and be able to solve problems better. This study suggests several main policy implications, namely building a more assertive trade policy based on the WTO and food safety technical rules that comply with WHO rules, increasing intra-trade within the ASEAN group, maintaining food price stability, encouraging investment in agriculture, promoting governance reforms, and strengthening the regional food security system in terms of production, consumption, and distribution. Support policies are also needed regarding solid prevention efforts against stunting and malnutrition and digitalization (Agritech 4.0), which supports food availability. In addition, this research also suggests that ASEAN can continue to increase domestic food production for resilience to the global crisis. Keywords: trade openness, tariff, globalization, food security, ASEAN, dynamic panel

Identifying the Influence of Foreign Direct Investment Toward the ASEAN Economic Community 2025

ASEAN as a region has a great economic potential, which explains the large interest in terms of investment in the region. The ASEAN Economic Community (AEC) cooperation program is also a milestone in increasing foreign investment in ASEAN. This study uses a quantitative approach, with the subject of this research being 10 ASEAN countries in 2015–2021. The dependent variable used in this study is foreign direct investment, and the independent variables are government effectiveness, political stability, trade openness, and the workforce. The data in this study comes from the world bank. The analytical method applied in this study is the panel data regression analysis method. Based on the research results, it can be concluded that trade openness and labor force had a positive and significant impact on foreign direct investment in 10 ASEAN countries in 2015–2021. At the same time, government effectiveness and political stability had a positive but insignificant effect. The results of simultaneous testing show that government effectiveness, political stability, trade openness, and the workforce influenced foreign direct investment in 10 ASEAN countries in 2015–2021. The government can use this study in determining foreign investment policies, especially those related to maintaining a stable investment climate. Keywords: ASEAN, foreign direct investment, government effectiveness, labor force, political stability, trade openness

The Impact of Monetary Policy and Macroeconomic Indicators on the Current Account in Developing ASEAN

The current account balance is a component of the balance of payments, in which a surplus or deficit is a form of a country’s external balance or imbalance. Since the 2008 financial crisis and the COVID-19 pandemic, several countries, especially developing countries, have experienced external imbalances, which is related to a continuous pattern of transactions with the rest of the world. Developing countries in the ASEAN region are often vulnerable to experiencing external imbalances which are reflected in their current account balance, which every year the country continues to fluctuate and tends to decrease until it experiences a current account deficit. This research was conducted to analyze the impact of monetary policy and macroeconomic indicators on the current account situation of developing countries in the ASEAN region during the 15 year period of 2007–2021. The Current Account Balance as the dependent variable and the independent variable uses Interest Rates in explaining monetary policy and macroeconomic variables including Exchange Rate, Inflation, Gross Domestic Product, Foreign Direct Investment, and Trade Openness. This study analyzes long-term and short-term effects using the VECM panel model. The results show that Interest Rates in the short term has no effect, but in the longer term has a significant negative effect. The Exchange Rate in the short term and long term have a significant positive effect. Inflation and GDP have no effect in the short term but have a significant negative effect in the long term. FDI has a significant positive effect in the short term and the long term. And finally, Trade Openness in the short term has a significant positive and in the long term has a significant negative effect. Keywords: current account balance, interest rate, macroeconomic, VECM panel

Financial Development Shock and Foreign Direct Investment in Indonesia

This study analyzed the response of Foreign Direct Investment (FDI) due to the shock on financial development in Indonesia from January 2010 to December 2022. The variables used in this research are FDI and financial development, which measure financial development using traditional measurements such as the Amount of Money in Supply, Credit, and Market Capitalization. Interest Rate and Trade Openness Variables were used as control variables. The study used the VECM method. Results show that in response of the shock on financial development on FDI, Money Supply is positive, Credit negative, and Market Capitalization negative. Keywords: foreign direct investment, financial development, money supply, credits, market capitalization

Unraveling the Environmental Consequences of Trade Openness in South Africa: A Novel Approach Using ARDL Modeling

Abstract Free trade and environmental sustainability are currently top economic and environmental research priorities. While numerous theories connect trade openness with environmental quality, empirical evidence often fails to support these claims. Using data spanning from 1980 to 2020, our study examines the effect of trade openness on CO2 emissions in South Africa. By employing a novel ARDL modeling framework, our analysis confirms the presence of the Environmental Kuznets Curve (EKC) hypothesis in South Africa. Our findings reveal that while GDP square enhances environmental quality, trade openness and economic growth have a degrading effect over time. Additionally, the study identifies that energy consumption, FDI, and value-added activities all contribute to environmental degradation. Findings also highlights the influence of institutional quality on the environment, demonstrating that political stability and control of corruption lead to increased CO2 emissions, while the rule of law reduces CO2 emissions. The research suggested that the potential of green economies should be leveraged in developing renewable energy, sustainable development, the recycling industry, and green financing sectors. A shift in economic activity in this direction will thus foster long-term economic growth and sustainable development.

Transition towards natural resource rents and green technology to achieve China’s COP26 Success: A novel insights in the case of trade openness and environmental pollution

This study aimed to investigate the impact of various factors such as natural resource rents, trade openness, green technology innovation, oil prices, and economic growth on environmental pollution in China by covering the period from 1970 to 2021, aligning with the COP26 agenda. These factors included. To accomplish this, we utilized an advanced Quantile Autoregressive Distributed Lag model to scrutinize the short- and long-term quantile patterns for both the dependent and independent variables. The findings reveal that green technologies and natural resource rents play a negative role in reducing emissions, whereas economic growth and trade openness have positive effects on emissions levels in China in the short and long run during different quantile patterns. Additionally, we employed the Wald test to confirm the presence of asymmetric patterns in environmental pollution concerning economic growth, natural resource rents, green technological innovation, and trade openness in both the short and long terms. These results emphasize the significance of prioritizing key policy measures to align with the COP26 agenda, including enhancing green technology via natural resource rents and addressing immediate climate change challenges in China.

Do FDI And Trade Openness Affect Economic Growth Differently Across Income Groups? Case Studies From Asian Countries

This study examines the nexus between foreign direct investment (FDI), trade openness (TRO) and economic growth for selected 11 high-income and 22 middle- and low-income Asian countries within a model using a more recent panel dataset over the period 2000–2021. The cointegration test has been applied in this study, which shows that whether there is a long-term interrelationship between FDI and economic growth, which we focus on in particular, and then the covariance matrix estimators that are developed by Driscoll and Kraay are used. Our findings indicate that there is a positive relationship between FDI and TRO, and economic growth for high-income countries, whereas the relationship between FDI and economic growth is negative for middle- and low-income countries. This study provides insights on why governments and policy makers in developing countries should focus on prioritizing domestic investment and production strategies for sustainable economic growth rather than simply emphasizing the attractiveness of FDI and the indispensability of import-oriented trade liberalization.

ECONOMIC AND FUNCTIONAL DIMENSIONS OF THE DEVELOPMENT OF INTERNATIONAL TRANSPORT CORRIDORS IN THE CONTEXT OF GLOBALIZATION

Under current conditions of growing interdependence of national economies, global supply chains are being transformed and trade flows are being reoriented. The dynamics and scale of these processes are largely determined by the efficiency of international transport corridors. Investments in transport corridors have a significant multiplier effect on the entire economy by stimulating the development of transport and logistics and related sectors of the economy, creating a growing demand in labour markets, and developing global value chains, international production, trade and logistics networks. The purpose of the article is to study the impact of international transport corridors on the development of territories at the national and regional levels. The use of descriptive statistics allowed to assess the impact of international transport corridors on the level of economic development, trade openness and foreign trade volumes based on the analysis of data from 121 countries. The links between the zones of influence of international transport corridors and other functional types of territories in Ukraine were investigated. The territorial coefficient of environmental load in the context of Ukrainian regions was calculated. The results of the study will be useful for both researchers in the field of logistics and transport infrastructure development and policymakers in the field of transport and economic policy.

Similarity index for estimating tax reform program and its impact on tax revenue

Tax reform in Indonesia begins with implementing self-assessment approach for elevating voluntary tax compliance. We use 16 developed countries' tax structures as a benchmark for measuring Indonesia's tax reform with the Similarity Index. The result of the Similarity Index shows Indonesia Tax Reform fluctuating trend in 40 years, which started at 72,56% in 1980 and ended at 55,84% in 2019. Furthermore, with the VAR model and international trade openness as variable outside the model in our study, we found that GDP per capita, and inflation, altogether with tax reform had created a 20% positive causality impact on tax revenue in the first three years and 5% in the year tenth. Negative causalities impact which shown in the fourth to ninth year is relevant to the declining trend of Indonesian tax reform that we previously measured. Therefore, it is important for the government to critically focus on developing the structure of the direct tax, indirect tax, and international tax after the first three years of period to maintain the positive impact of tax reform for growing tax revenue in the long term.

How do economic growth, trade openness, and non-renewable and renewable energy affect environmental quality in VISTA Countries?

Purpose ─ This study examines the effects of economic growth, the use of renewable and non-renewable energy sources, and trade openness on carbon emissions in VISTA countries (Vietnam, Indonesia, South Africa, Turkiye, and Argentina)Method ─ In this work, empirical methods include the second-generation unit root and cointegration tests, as well as Panel AMG and Panel CCE estimators.Findings ─ The following are the key findings. First, the variables demonstrate a long-run relationship. Second, economic growth and the consumption of non-renewable energy sources contribute to an increase in carbon emissions over time, whereas the consumption of renewable energy sources lowers carbon emissions over time. Implication ─ To promote sustainable growth in VISTA countries, it is recommended to increase investments in renewable energy sources while enhanching public sector supports for the private sector.Originality ─ This is the first study to examine how economic growth, trade openness, and renewable and non-renewable energy sources affect carbon emissions in VISTA nations.

The Link Between Trade Openness, Economic Growth, Energy Use and Carbon Emissions: Analysis with a Conceptual Model Proposal

This study examines the relationship between trade openness, economic growth, energy consumption and carbon emissions (CO2) with Structural Equation Modelling (SEM) by offering a model proposal. In this context, a path analysis was carried out with SEM using the 2000-2020 period data of 83 developed and developing countries to examine the direct and indirect effects between the variables. The study's findings show that trade openness directly and significantly affects economic growth, energy consumption and CO2. When the indirect effects are examined, it has been determined that economic growth and energy consumption mediate the relationship between trade openness and CO2, and energy consumption mediates the relationship between economic growth and CO2.

Investigating the Impacts of Trade Openness and Energy Consumption on Environmental Quality in Azerbaijan: An Analysis under the Load Capacity Curve Hypothesis

Investigating the Impacts of Trade Openness and Energy Consumption on Environmental Quality in Azerbaijan: An Analysis under the Load Capacity Curve Hypothesis

Exploring the Macroeconomic Effects of Renewable Energy in Tajikistan: An Empirical Analysis

Tajikistan holds the eighth position globally in terms of hydropower potential, estimated at 527 terawatt-hours (TWh), with a technically exploitable capacity of 317 TWh. Only 4–6 percent of this immense potential is currently utilized. In this paper, employing a combination of the Johansen cointegration test, vector autoregression, and the Granger-causality test on annual data from 1993 to 2021, we examine the causality relationship between electricity production and key macroeconomic variables, including gross domestic product (GDP), GDP per capita, exports, imports, final consumption, capital investment, and employment, in Tajikistan. The empirical findings reveal a positive unidirectional causality from electricity production to exports and imports. A positive bidirectional or feedback causality is found between electricity production and variables such as GDP, GDP per capita, final consumption, and employment. No causality relationship between electricity production and variables such as trade openness and capital investment is observed. The exploration of complex causal relationships between electricity production and key macroeconomic variables in Tajikistan, as revealed in this study, offers a modest yet meaningful addition to academic discourse. It presents insights that may inform policymakers and stakeholders, albeit with a recognition of the limitations inherent in the findings. These insights could potentially guide the formulation of sustainable development strategies and shed light on the underutilized potential of the country’s hydropower resources.

The Influence of the Banking Sector on Economic Growth and Commodity Prices: A Panel Data Analysis of Spain, France, and Romania

This study aims to investigate the impact of the banking sector on economic growth and commodity prices. Through panel data analysis, the research explores the relationship between the banking sector and economic growth in Spain, France, and Romania from 2000 to 2020. The findings reveal a positive correlation between the strength of the banking sector and economic growth across these nations, underscoring its pivotal role in fostering economic expansion and subsequently improving commodity prices. Additionally, this study evaluates various regulatory measures crucial ensuring the banking sector’s sustainability and preventing financial crises, including credit risk management, lending policies, liquidity constraints, and international financing and investment strategies. By analyzing the interplay between regulatory measures and banking sector performance, incorporating variables such as non-performing loans, household debt, liquid liabilities, government consumption expenditure, foreign investments, and trade openness, this research provides policymakers with valuable insights to formulate effective strategies for promoting economic stability and ensuring the sustainability and growth of the banking sector.

Dynamic effects of digital governance and government interventions on natural resources management: Fresh findings from Chinese provinces

This study investigates the dynamic effect of digital government on natural resource management in 30 Chinese provinces, considering the government intervention policies, GDP, foreign direct investment, trade openness, and energy prices. In this context, QLARDL, QR, and Dumitrescu Hurlin Panel Causality approach estimate the panel data collected from 2010 to 2020. Results suggested that the digital government positively impacts natural resources management at various quantile levels. On the contrary, government intervention has a limited effect, while Foreign direct investment boosts natural management, especially in the long run. At the same time, energy prices and openness trade significantly negatively impact natural resources management. Based on the empirical findings, several policy implications are suggested for the Chinese provinces.

The Asymmetric Impact of Financial Expansion, ICT Development, and Trade Openness on China’s Economic Growth

The Asymmetric Impact of Financial Expansion, ICT Development, and Trade Openness on China’s Economic Growth

The role of digital financial inclusion in promoting entrepreneurship in China: A provincial perspective

This study examines the impact of DFI on entrepreneurship in China and across its regions (i.e., rural and urban) using province-level panel data from 2011 to 2019. Digital financial inclusion (DFI) serves as a catalyst for entrepreneurship by giving access to financial services. Entrepreneurs, both in urban centers and rural areas, gain fair and equitable platforms by unlocking opportunities for growth and innovation through the use of technology. We employed fixed effect Driscoll-Kraay standard errors (FE-DKSE) and feasible generalized least squares (FGLS) techniques for empirical analysis. The findings showed that there is an N-shaped relationship between the DFI and entrepreneurship in China and across its regions (i.e., rural and urban). Our estimates are robust and insensitive to the inclusion of other control variables such as economic growth, urbanization and trade openness. Economic growth and trade openness have a positive and significant impact on entrepreneurship, and a negative relationship between urbanization and entrepreneurship. The policy insinuation is that the government needs to actively expedite the growth of DFI and establish a favorable external environment for entrepreneurship. To enhance the attainment of entrepreneurial targets, it is essential to adapt DFI policies according to regions.

International Trade and Income Inequality: The Case of Latin American Countries

ABSTRACT The literature suggests that international trade may have different results over income inequality according to a country’s trade and economic structure. The main goal of this article is to analyze the impact of international trade on income inequality in Latin American countries between 1997 and 2020. Our results suggest that international trade variables, such as trade openness and economic complexity, are highly significant and have impacted the income distribution. The results show that following the process of trade openness, the “simplification” of the economy led to a reduction in income inequality in the region.

Trade openness, human capital, natural resource, and carbon emission nexus: a CS-ARDL assessment for Central Asian economies.

There is a call for global efforts to preserve the ecological systems that can sustain economies and people's lives. However, carbon emission (CEM) threatens the sustainability of humanity and ecological systems. This analysis looked into the influence of energy use (ERU), human capital (HCI), trade openness (TOP), natural resource (NRR), population, and economic growth (ENG) on CEM. The paper gathered panel data from the Central Asia region from 1990 to 2020. The CS-ARDL was applied to establish the long-term interaction among the indicators. The paper's findings indicated the presence of the environmental Kuznets curve (EKC) in the Central Asia regions. Also, the empirical evidence highlighted that energy use, natural resources, and trade openness cause higher levels of CEM. However, the research verified that CEM can be improved through human capital and urban population growth. The study also found that HCI moderates the interaction between NRR and CEM. The causality assessment indicated a one-way interplay between ENG, ERU, NRR, and CEM. The study proposes that to support ecological stability in these regions, policy-makers should concentrate on developing human capital, investing in renewable energy sources, and utilizing contemporary technologies to harness natural resources in the economies of Central Asia.