Trade openness, economic growth and competitiveness. The case of the Central and Eastern European Countries

Abstract

This article examines the effects of trade openness on the economic growth and competitiveness of Central and Eastern European countries (CEEs). Although CEEs are characterised by high indicators of trade openness, they show rather different trends of economic development and competitiveness. In most CEEs, trade policies are oriented towards regional trade cooperation with an explicit aim of integration in global economics. The empirical research was conducted on the basis of the panel data for 11 CEEs over the period 2000 to 2014 by applying correlation analysis. Granger-causality test and vector autoregression (VAR) model. This methodological framework allows to test the direct causality relations among trade openness, economic growth and competitiveness, and enables to distinguish between short-run and long-term effect. The research results have confirmed the empirical interdependence among the triad components-trade openness, economic growth and competitiveness, i.e. it has been established that economic growth leads to the improvement of trade openness, while competitiveness of the CEE region leads to the improvement of economic growth, which has obviously disclosed the validity of the theoretical insights. Granger-causality test as well as the developed VAR model have revealed that economic growth has a long-lasting effect on trade openness, while the indicators of competitiveness have a longlasting effect on GDP per capita in CEEs.

Imperfection of the World Trade Organization as a Hazard for International Business

“…Ben-David and Loewey in 1997 (Hoekman & Kostecki, 2009: 16) indicated the importance of trade openness for sustained increase of economic growth as essential factor in lowering poverty rate. Studies by Sachs and Warner (1995) and Pilinkiene (2016) found that open economies grew faster than closed ones. Contrary to the above, sceptics demonstrate that there is a positive relation but it is the growth that contributes to openness rather than vice versa.…”

The effects of european economic integration and the impact of Brexit on the uk immigrants from the CEE countries

“…This is the reason for advanced innovations and technologies fl ow from leading economies to followers via trade openness. Greater rate of innovation and technology absorptions promotes the raise of human resources skills and capacities (Balcerzak, 2016), which, in turn, leads to economic growth in the long run (Pilinkiene, 2016).…”

“…slightly higher than the EU average. Hence, it is purposeful to research whether higher degree of country's competitiveness leads to lower degree of trade openness and vice versa, and to defi ne the conditions for this interrelation (Pilinkiene, 2016;Lelek, 2014).…”

The Impact of Trade Openness on Economic Groth in the Middle East and North African Countries: An Application of the Autoregressive Distributed Lag Model.

“…al., 2016). Moreover, Pilinkiene (2016) shows that internationally active countries are much more productive and competitive in comparison to those producing and acting exceptionally in the local market. International trade has a positive effect on the efficiency of resource allocation and determines faster the growth of economy, which might transform into a greater factor accumulation, in particular in the countries with technology diffusion and knowledge spill overs.…”

“…Moreover, trade openness defined as reduction of policy barriers to international trade rather than trade intensity (Ulasan, 2012). Although trade openness is affected by such factors as the size of country, duty level, the cost of transportation or distance to trade partners, export and import volumes remain the key constituents that most precisely depict the trade openness (Pilinkiene, 2016) The classical economists view that capital movement liberalization and trade openness will increase the growth of economy and welfare after 1980s. According to Classical and Neoclassical economists, foreign trade has important contributions to the development and the foreign trade is not only an effective productivity instrument but also it is the engine of the growth.…”