A Panel Data Approach to the Contribution of Trade to the Growth of Selected East Asian Countries

Abstract

Panel data methods are used to estimate the contribution of openness of trade to the long term or the steady state rate of growth of output (SSGR) of selected East Asia countries viz., Singapore, Malaysia, Thailand, Hong Kong, Korea and the Philippines. Since SSGR is unobservable, its estimates are derived by estimating modified production functions and by imposing the equilibrium conditions of the Solow (1956) growth model. Panel cointegration tests showed that there is a well defined long run relation between output, trade ratio and capital. Growth accounting exercise showed that factor accumulation is the dominant contributor to the SSGR of this region. Openness of trade, however, has made a significant contribution to SSGR by 1999-2003.Panel unit root and cointegration tests, Trade Openness, Total Factor Productivity and East Asian Countries