Regime-switching model estimates the impact of trade openness on the economic growth of the Arab Maghreb Union

Abstract

This paper examines the non-linear effects of trade openness on economic growth in the five Maghreb countries—Tunisia, Morocco, Algeria, Libya, and Mauritania—from 1990 to 2021, using the Panel Smooth Transition Autoregression (PSTAR) model. The results confirm the trade-led growth (TLG) hypothesis, but this relationship is only significant when trade openness exceeds a threshold of 98.145%. Causality tests support this finding, highlighting the need for trade infrastructure improvements and trading partners' diversification. Furthermore, promoting a comprehensive politico-economic integration between the union members helps the AMU to overcome its structural limitations and to rationalize the substantial end-proven benefits of trade openness with the rest of the world. JEL Classification: F14; C24.