The Impact of Trade Liberalization on the Trade Balance in Developing Countries
IMF Working Papers, January 1, 2008
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Bibliographic details
- Authors: Yi Wu, Li Zeng
- Published: January 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451868760.001
Summary findings
- Using two recently constructed measures of trade liberalization dates, the research studies the impact of trade liberalization on imports, exports, and overall trade balance for a large sample of developing countries.
- Strong and consistent evidence that trade liberalization leads to higher imports and higher exports.
- Mixed evidence on the impact of liberalization on the overall trade balance:
- Using the first measure of liberalization dates (which extends Li (2004)), little evidence of a statistically significant negative impact on the overall trade balance.
- Using the second measure of liberalization dates (compiled by Wacziarg and Welch (2003)), some evidence that liberalization worsens the trade balance, but:
- The evidence is not robust across different estimation specifications.
- The estimated impact is smaller than that reported by Santos-Paulino and Thirwall (2004).
Measures and methodology
- Two measures of trade liberalization dates are employed:
- First measure: extends Li (2004).
- Second measure: compiled by Wacziarg and Welch (2003).
- Estimation results vary by specification, producing robust results for imports and exports but mixed results for the overall trade balance.