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The Commutative Effect and Casuality of Openness and Indigenous Factors Among World Economies

By Kui-Wai Li and Xianbo Zhou

Abstract

The paper studies the commutative and causality relationship between economic openness and indigenous factors. The construction of the Openness Index and the Indigenous Index provides a measure on the extent of openness and indigenous development among world economies. The two indices are used to study their commutative effect and causality. The empirical findings show that there is a positive and significant static effect of openness on indigenous factors and vice versa; however the latter is larger. There are bi-directional dynamic causality relationships between openness and indigenous factors. Indigenous factors help to forecast openness factors and vice versa.Openness, indigeneity, panel data model, commutative effect, causality

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