Trade policy is a major issue for developing countries that are undergoing economic reform. Using a cross-section database of thirty developing countries, it is shown that countries with more open and less distortive trade policies have grown faster than countries with more restrictive policies. In contrast with studies which rely on subjective ratings of policies, or on measures of tariffs which neglect non-tariff barriers, this study relies on an objective measure of trade policies: indices constructed by Learner comparing predicted free trade net trade flows with actual net trade flows. Additional determinants of growth are investment, measured as the ratio of gross investment to GDP, and a knowledge gap, measured alternatively as initial GDP per capita and as engineers engaged in R&D per thousand inhabitants. Investment has a positive effect on growth. A negative estimated effect of the knowledge gap implies that poorer countries will catch up, through higher growth, to richer countries. An in-depth sensitivity analysis suggests that these findings are robust to the choice of trade policy indicator, estimation method, sample selection, measurement error correction, equation specification, and the time period used.
In this paper I use a panel data set to investigate the mechanics of sudden stops of capital inflows and current account reversals. I am particularly interested in four questions: (a) What is the relationship between sudden stops and current account reversals? (b) To what extent does financial openness affect the probability of a country being subject to a current account reversal? In other words, do restrictions on capital mobility reduce the probability of such occurrences? (C) Does
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