International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Trade Openness and Economic Growth: A Panel Causality Test
Fatma Zeren, Ayse Ari

The relationship between openness and economic growth is a controversial topic in economics literature. This paper applies the most recently developed Granger non-causality test in heterogeneous panels to reinvestigate the causality relationship between trade openness and economic growth for the G7 countries between 1970 and 2011. The empirical results show there is a bidirectional causality relationship. Thus, as is advocated by the theories of endogenous growth, as openness increases, growth increases in the G7 countries and, subsequently, the increase in growth increases openness.

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