How does trade openness influence budget deficits in developing countries?
By Jean-Louis Combes, Tahsin Saadi-Sedik. Social Science Research Network, 2006
122 citations recorded by the source corpus.
Abstract This paper analyses the effects of trade openness on budget balances by distinguishing the effects of natural openness from those of trade policy. Revealed indicators of natural openness and trade policy are computed. Using GMM-system estimator, the econometric analysis focuses on 66 developing countries over 1974–98. The results show that trade openness increases a country's exposure to external shocks. This enforces the negative impact on budget balances of terms of trade instability. Additionally, trade openness influences budget balances through several other channels: corruption, income inequalities, etc. Then natural openness and trade policy have opposite effects: the former deteriorates budget balances whereas the latter enhances them.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/7fcf635fd238997db11553079d46748552a9f4e0
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
Citations in the corpus
- Yardstick competition in a Federation: Theory and Evidence from China (2012, background): “As Combes and Saadi-Sedik (2006) have shown, even if trade openness increases a country s exposure to external shocks and thereby adversely a¤ects its budget balances, an outward looking policy strategy should lead to an overall strengthening of its budget balance.”
- The impact of extreme weather events on budget balances (2009, unknown): “We consider the last three alternatives when we perform robustness checks.(11) Concerning other independent variables as control variables, we have decided to include the following budgetary, macroeconomic, and political variables in the estimations:(12) The lagged change in the debt ratio (∆debtt−1”