Dynamic And Heterogeneous Impacts Of Trade Liberalization On Economic Development: An Empirical Investigation For China's Approach And Washington Consensus Approach

After the failure of the traditional import substitution strategy in the 1950-1970 s,many developing economies transformed toward a market-oriented trade liberalization strategy advocated by international institutions named as "Washington Consensus".Most developing countries,including Turkey,have adopted this consensus which is a development prescription suggesting all developing countries to follow the same trade policy regime.In contrast,China has integrated into the global market without surrendering to the Washington Consensus.Instead,China has experienced a novel path which is named “Beijing Consensus” by some scholars.Besides,China's marvelous economic development contrasted markedly with the unimpressive experience of many developing countries that adopted the Washington Consensus.Multiple theories and numerous empirical researches suggest that trade liberalization contributes to economic development.Therefore,the exceptional economic growth of China may be associated with the trade liberalization approach.However,to my best knowledge,Washington Consensus and China's policies have not been examined together in terms of the trade-growth axis.The purpose of the current thesis is to explore whether the relationship between trade and growth differs by trade liberalization policy.To accomplish this overarching aim,my thesis addresses four questions.As such,the research stream has been divided into four phases to address each specific research question.The first stream aims to explore how the relationship between trade and growth differed with different trade liberalization policy choices in China and Turkey.The reasons for selecting China and Turkey were that 1)these countries adopted the different type of liberalization.Turkey followed Washington Consensus type of trade liberalization while China preferred to develop different ‘Beijing Consensus'.2)they carried out the trade liberalization reforms in close years(1978 and 1980,respectively),and 3)two middle income countries had close GDP per capita income levels in 2018.The imports,exports,and GDP data of China(1978-2017)and Turkey(1980-2017)were used.VEC model was applied to investigate the relationship between trade and growth in both countries.Results revealed that exports promoted GDP growth in both countries while imports improved GDP growth only in Turkey.Furthermore,TIVA analysis was used to investigate whether trade liberalization strengthen the domestic market in terms of import and export dependency considering production fragmentation data in the years of2005-2016.Results indicated that China's domestic market got stronger in the international market;however,there were no significant changes in Turkey.The second stream focused on the relationship between trade and growth in China and thirteen developing countries following Washington consensus policies.The reason for including the other developing countries was to explore whether the associations between imports,export and GDP in Turkey,which differed from those in China,apply to other countries following the Washington Consensus.These countries were selected considering the following four criteria: 1)Middle income countries due to different stage of development may call for different of strategies of development.2)Countries population were over 10 million in the year 2017 to avoid low population countries.3)countries liberalizing trade.4)Excluding countries such as Russia and Kazakhstan where most of their exports are made up of natural gas.The imports,exports,and GDP data of these countries from 1980 to 2017 were used.VAR and VEC models were applied to investigate the relationship between trade and growth in these countries.Results showed that exports promoted GDP growth in all countries while imports improved GDP growth only in the countries which adopted Washington Consensus Policies.This result was similar to the result obtained in the first stream.Besides,China appeared to benefit more from foreign trade among other developing countries and to have a stable and high growth trend.Results of the first and second stream led two further investigations.The first was to explore whether imports played an essential role in GDP growth.Thus,the third stream examined the role of imports components in GDP growth in Turkey.Import components and GDP data from 1998Q1 to 2018Q3 were used.VEC model was conducted to analyze the data.Results showed that dependency on foreign technology and lacking catch up with industrial technology.The second was to explain domestic market productivity in China,Turkey and other developing countries.Therefore,by using panel analysis,the fourth stream investigated whether Foreign Direct Investment(FDI)had a critical role in Domestic Value-Added Exports in developing countries.FDI and Domestic Value-Added Exports data of all countries from 2005 to 2015 were used.Results showed that inflow FDI had a highly significant effect on Domestic Value-Added Exports.Besides,China benefited from FDI more than other developing countries,and FDI had a critical role in domestic market productivity and exports.This study provides useful insights for policy and decision makers to implement development policies by considering the specific conditions of the countries for expected success as China achieved.Also,it provides empirical findings to stimulate more investigations on China's unique success in both empirical and theoretical perspective.