Working Paper: NBER ID: w3876
Authors: Nouriel Roubini; Xavier Sala-i-Martin
Abstract: We survey the literatures that study the relation between the trade regime and growth and financial development, financial repression, and growth. We analyze the relation between the trade regime, the degree of financial development and the growth performance of a large cross section of countries. The systematic finding is that there is a negative relation between trade distortions and growth. We also present some variables that capture the degree to which the financial sector is distorted. We find that financial repression has negative consequences for growth. We also find that inflation- is negatively related to growth. We interpret this relation, however, as symptomatic rather than causal. We show that once we hold constant measures of the trade regime and financial repression, the regional dummies for Latin America are no longer significant. Thus, the poor performance of the Latin American countries over the last few decades is related to the trade and financial policies pursued by their governments.
Keywords: Trade Regime; Economic Growth; Financial Development; Financial Repression
JEL Codes: O11; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade distortions (F14) | Economic growth (O49) |
| Financial repression (G28) | Economic growth (O49) |
| Inflation (E31) | Economic growth (O49) |
| Trade and financial policies (O24) | Economic growth (O49) |