Trade Openness and Economic Growth among Developed and Developing Countries in Relation to the Global Financial Crisis of 2007–2009 and the Asian Financial Crisis of 1997

Abstract

As globalization made modern economies more integrated, financial crisis that happens in single country can reach other countries unprecedentedly easier resulting in severe global or regional financial crisis. Recent crises such as the Asian financial crisis in 1996 and the global financial crisis in 2008 make it more vital to investigate the reasons why some countries economically performed better than other during financial crises. This dissertation aims to measure the influence of the two financial crises in 1997 and 2008 on economic growth of developed and developing countries, and the nexus of trade openness and economic growth during financial crises. Empirical analyses were conducted using panel data from two samples of developed and developing countries including three economic indicators employ as proxy for trade openness namely exports, imports and FDI. The panel data regressions generated evidence support the narrative that developed countries effected more severely by financial crises in compare with developing countries. Furthermore, the results imply that trade openness policies can mitigate the negative effects of a financial crisis since developing countries were more economically liberal during the two crises in 1997 and 2008. Finally, the dissertation indicates that developed and developing countries are differ in the determination of economic growth. Therefore, the adaptation of more trade openness polices, especially in developing economies, can be decent strategy to ensure that the economy will be more resilience during any financial crisis.