A widely held view in academic and policy circles is that openness to international trade and specialisation leads to higher GDP volatility. This column argues that openness to international trade can also lower a country’s GDP volatility by allowing it to diversify its sources of demand and supply, and hence reduce its exposure to domestic shocks.
Francesco Caselli, Miklós Koren, Milan Lisicky, Silvana Tenreyro, 14 October 2015
Otaviano Canuto, Cornelius Fleischhaker, Philip Schellekens, 11 January 2015
While Brazil has become one of the largest economies in the world, it remains among the most closed economies as measured by the share of exports and imports in GDP. This column argues that this cannot be explained simply by the size of Brazil’s economy. Rather it is due to a reliance on domestic value chain integration as opposed to participation in global production networks. Greater trade openness could produce efficiency gains and help Brazil address its productivity and competitiveness challenges.
Patricia Ellen, Jaana Remes, 12 July 2014
Brazil has grown rapidly and reduced poverty over the past decade, but it has grown more slowly than other emerging economies and its income per capita remains relatively low by global standards. This column points out that sectors of the Brazilian economy that have been opened up to international competition have outperformed those that remain heavily protected. Deeper integration into global markets and value chains could provide competitive pressures that would improve Brazil’s productivity and living standards.
Gary Clyde Hufbauer, Martin Vieiro, John S.Wilson, 14 September 2012
Economists celebrate trade not only because they love watching ships cross the Pacific and cargo planes land at Paris Charles-de-Gaulle but also because increased trade demonstrably raises income and improves living standards. This column argues that a powerful way to boost trade is by focusing on trade facilitation, i.e. improving both hard infrastructure like ports and railways, and soft infrastructure such as shipping logistics.
Markus Brückner, Daniel Lederman, 02 May 2012
The recent growth performance in sub-Saharan Africa has been remarkable given that, for over four decades since 1960, real GDP per capita growth had been dismal, averaging less than 0.5% per annum. This column, using within-country variation and instrumental variables, argues that increases in openness to trade are behind this performance.
Timothy Kehoe, Kim Ruhl, 19 November 2011
In 1985, Mexico opened itself to trade and investment. In recent years, China has followed the same path with much more impressive results. But this column argues that the slow growth and crises that Mexico experienced after the initial boom should act as a warning to those optimistic about China.
Giuseppe Bertola, Anna Lo Prete, 20 May 2010
Financial interconnectedness across countries has reached unprecedented levels – but what has driven this change? This column finds that financial deregulation is responsible for 16 percentage points of the increase in financial development, but openness to trade and the size of government off-set one another. This is because the structural association between trade openness and financial development is mildly negative.
Mona Haddad, Jamus Lim, Christian Saborowski, 21 March 2010
Does openness increase volatility? This column argues that it doesn’t when countries are sufficiently diversified. These results amount to a powerful argument in favour of export differentiation policies as a means of deriving larger benefits from trade openness and shielding against global shocks.
Gino Gancia, Paolo Epifani, 28 March 2009
This column argues that more open countries have larger public sectors because greater involvement in foreign trade allows a government to shift more of the cost of providing a public good onto foreign consumers. Globalisation may actually protect or even promote public inefficiency.