40, No. For instance, the demand for groundnuts from a country may lead to the building of roads and an improved transportation system to support the production.

This conclusion was drawn on analysis made with data collected from the Venezuelan economy between 1979 and 1989.

This increase translates to more revenue and an improvement in the economy of the country.

Castro -zuniga (2004) studied a vast amount of literature covering the export led growth hypothesis in developed and developing countries. The promotion of exportation and technical assistance programs, as part of export-led growth strategy, they are generally created to attend to both internal and external limitations to exportation and to promote economic growth and development. In this essay I will rather explore more generally the relation between international trade and economic development and discuss some of the problems that have arisen in the effort to make trade a more effective instrument of development. Husain also points out that in developing countries where foreign capital has moved into industries producing for the local market the stimulus to growth “has been accompanied by an increase in the short-run rigidities in the balance of payments.…” (Ibid., p.

Your home market may be struggling due to economic pressures, but if you go global, you will have immediate access to a practically unlimited range of customers in areas where there is more money available to spend, and because different cultures have different wants and needs, you can diversify your product range to take advantage of these differences. Usage data cannot currently be displayed. The Monte C. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on the UKDiss.com website then please: Our academic writing and marking services can help you! (Aitken and Harrison 1999).

What Factors Affect the Growth of International Trade? (Pointon, 2001). Edwards (1992) will After all, the cheap goods from China make it possible for people to increase their standard of living here by buying products that they can afford.


International economic relations play an important role in the growth of economies across the world. (The Theory of Economic Growth [Homewood, III: Richard D. Irwin, 1955], p. 4 Deutsch, Karl W. and Eckstein, Alexander, “National Industrialization and the Declining Share of the International Economic Sector 1890–1959,” World Politics, 01 1961 (Vol. Some of these ways include the effects of import and export, specialization, increased productivity and … (Darrat, 1986). (Cavusgil, 1982, 1983).

(Darrat, 1986) Even though a lot of studies do fail to provide evidence of support of a relationship between export and economic growth there is evidence of a casual linkage between economic growth and export. Massell, however, finds only a tenuous relationship between instability of export earnings and commodity concentration. The regression approach generally involves a set of explanatory variables being regress against a growth variable in this case exports can regress against GDP. Externalities are the mechanism through which productivity gains by locally based firms occur, leading to the generation of economic growth in the host economy.

from our awesome website, All Published work is licensed under a Creative Commons Attribution 4.0 International License, Copyright © 2020 Research and Reviews, All Rights Reserved, All submissions of the EM system will be redirected to, International Journal of Innovative Research in Science, Engineering and Technology, Creative Commons Attribution 4.0 International License, International trade in recent decades has considerable growth, so that world trade of goods has exceeded 9 trillion U.S.

Also product trade growth and foreign investment has increased the role of these factors in country's economic 17 For an elaboration of this point in respect to UNCTAD see Frank, Isaiah, Foreign Affairs, Vol. Ekanayake tested for unit roots in the series, co- integration between the variables, and causality.

Glass and Saggi (1998) view the gap between the home country and the importing country as indicating absorptive capital but the larger the gap according to Glass and Saggi reduces the efficiency with which the home country will be able to absorb spillovers .This is because the home country will lack the necessary human capital and technological know-how. (2) This study showed that there was a positive significant relationship between gross domestic product or economic development and exportation using the VDC’s in all of the four countries examined. 289–305.)

In the last couple of decades different academicians have researched the usefulness of the ELG hypothesis in either a multi variate or bi variate setting.

This approach solves for some of the short coming presented in other cross sectional studies.it is common for the following three steps to be followed in most time series studies. There is no universal agreement as to the extent to which a governemt should engage in export promotion programs. Also as a result of technological spillovers, local firms in the same industry are able to benefit from improved production processes which will boost their out put and contribute positively towards the economic growth of the region in which they are located. Granger- causality tests were used to find out what the directional causation between gross domestic product or economic development and exportation. 317–337. A positive relationship is again confirmed. On the whole, international trade plays an important role on economic growth and economic development. Beach- Mackinnon maximum-likelihood method correcting for serial correlation were used to estimate the equations. Also see Lockwood, William W., The Economic Development of Japan (Princeton, N.J: Princeton University Press, 1954), Chapters 6 and 7.

The attraction for these type of firm may be the large supply of cheap manual labour who they can employ at low wages. telecommunications provided a new type of commercial relationships between different countries and regions of the

Ill]) (United Nations, 1964).

As such capital accumulation and technological transfer which are features of international trade contribute to the growth of an economy hence contributing to the economic development of a region. Political stability includes the possibility of a possible outbreak of war, coups , revolutions, and riots.

The increasing importance of multinational corporations and associated export for international production has prompted considerable interest in the effects of multinational firms and international trade on host countries and their economic development. The limitation they however faced for using the rank correlation coefficient for this study was that it didn’t consider the possibility that simple correlations where not sufficient enough to test for casualty as high correlation between other variables in the regression analysis can also show an increase in gross domestic product resulting from export. The relationship between trade and economic growth has continued to dominate the debate in trade and development economics. In the study, the authors found that there was no co-integration between gross domestic product and export. Investing therefore in their overseas plants, they will transfer some of this high level technologies.

Two recent events, both relating to international organizations, underscore this acceptance.

Eminent in the convergence hypothesis by Solow-swan, is the fact that an increase in the level of capital accumulation and improvement in technology in a country specifically a developing economy will lead to an increase in the capital labour ratio of the country. 2], pp. The book brings together many of the issues that are considered staple reading for a course in trade and development, but was previously unavailable in a comprehensive manner.

(Gorg 1999), For a country to be able to attract international trade in good quantity, there are certain basic things which should exist within the economy, before a firm engages in investment in a particular country, it takes in to account the level of political stability in the economy. At any rate, I think it’s important to have an accurate picture about the nature of our imports and exports. In their paper, they further seem to find no evidence of a positive technological spill over to domestically owned firms.

Apart from crude oil, other countries also partially base their national budget on the income from items like agricultural products, precious stones and even technology. study the goods and services flow and payments of a country with other countries.

New growth literature has laid emphasis on the importance of technological improvement on economic growth. From the results of their findings, they discovered that exports didn’t cause economic growth and economic growth didn’t cause exports in Hong Kong. 18 Hirschman, Albert O., The Strategy of Economic Development (New Haven, Conn: Yale University Press, 1958), Chapter 6. However, his effort to classify actual cases in accordance with three models in which trade acts as either a leading, balancing, or lagging sector in the economy is somewhat forced and unconvincing.

21 Pincus, John, Trade, Aid and Development (New York: McGraw-Hill, 1967), p. 74. Marshall and jung(1985) have examined the export led growth hypothesis by testing for auto correlation and casualty on a bi- variate auto regressive process for thirty seven countries. These changes might include an improvement in the material well being of the poorer half of the population; a decline in the agricultural share in the gross national product (GNP) marched by a corresponding increase in the GNP share of industry and services; an increase in the education and skill of the labour force; and substantial technical advances originating from within the country. The export led growth hypothesis was reexamined across Taiwan Singapore, Korea and Hong Kong by Darrat (1986) making use of the same time period 1960-1982 .

III, p. 142. Through these externalities, international trade inflows can potentially break the vicious circle of underdevelopment characterized by low savings, low investment and low growth, by easing capital, technology and knowledge into the host economy. International trade and therefore exports will only however have a positive effect on the economic growth of the country if there is the existence of available absorptive capacity in the host country. (Sinoha-Lopete,2004), A study was carried out in sixteen industrialized countries, by Afxentiou and Serletis (1991) to find out the significance of the export led growth hypothesis using data for the period 1950-1985. faster than world production. 2008. This is not an example of the work produced by our Essay Writing Service. They checked their models for unit roots and stationarity using the ADF test.

9 See Myint, H., “The ‘Classical Theory’ of International Trade and the Underdeveloped Countries,” Economic Journal, 06 1958 (Vol. Immigrants take much-needed skills to countries in which these skills are needed. Generally, countries which trade more have been seen to have a high growth path, some of which has been attributed to trade. With such increased trade, trade cost has become a major concern. “International trade reduces the productivity of domestic firms through the competition effects, multinational firms have lower marginal costs due to some firm specific advantage, which allows them to attract demand away from domestic firms, forcing them to reduce production and move up their average cost curves”.

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