Analysis of the Nexus between Trade Liberalization and Economic Growth: A Panel Study Of Brics Countries

Abstract

BRICS countries forms a heterogeneous alliance. Their economic and political influence differ. They are distinguished by the outstanding size of their economies; strong growth rates and demand for stronger voice in the international governance and world economies. It is evident that BRICS have opened up their economies more than any other emerging economies. What is not clear to observers, is the extent to which international trade has contributed to the economies of these countries. The study therefore, seek to analyze the causal relationship between trade liberalization and economic growth among BRICS Economies

The study used a balanced panel data of the five BRICS Countries, (Brazil. Russia federation, India china and South Africa). For a period spanning from 1990 to 2014.

Using a static fixed effect model and a dynamic panel of the Arrelano-Bond approach to GMM we estimate the dynamic impact of trade liberalization on Economic Growth, we found that under both the static and dynamic model, trade liberalization (proxy by TO) was found to exert positive and significant impact on economic growth rate.

It is suggested that developing countries that want to follow the path of BRICS economies to economic recognition should consider developing internal institutions that leads to a greater trade openness (liberalization).