Date of this Version

11-1-2012

Document Type

Journal Article

Publication Details

Accepted version

Falvey, R., Foster, N., & Greenaway, D. (2012). Trade liberalization, economic crises, and growth. World Development, 40(11), 2177–2193. ISSN: 0305-750X

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2012 HERDC submission. FoR code: 140210

© Copyright Elsevier Limited, 2012

Notice: This is the author’s version of a work that was accepted for publication in World Development Journal. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in World Development, 40(11) November 2012. DOI: 10.1016/j.worlddev.2012.03.020

ISSN

0305-750X

Abstract

Many economic reforms are undertaken during an economic crisis, but is a crisis a good time to undertake trade reform? We investigate whether an economic crisis at the time of trade liberalization affects a country's subsequent growth performance. We employ threshold regression techniques on five crisis indicators to identify the "crisis values" and to estimate the differential growth effects in the crisis and non-crisis regimes. Although trade liberalization in both crisis and non-crisis periods raises subsequent growth, we find that an internal crisis implies a lower acceleration and an external crisis a higher acceleration relative to the non-crisis regime.

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