Theoretical Model Of International Trade And Economic Growth And Evidence,

The issue of growth promoting effect of foreign trade on GDP has been one of a central themes in International Trade Theories. Numerous empirical studies have been conducted dealing with different aspects of this effects by foreign scholars. After Reformation-Opening of China, especially with the expansion of China's foreign trade in recent years, more and more empirical researches also have been done by domestic scholars and some achievements have been got.In this essay I tried to find how foreign trade affect economic growth of our country through empirical investigation between foreign trade and economic growth, that is, to identify the paths through which the effects of foreign trade are transmitted to output growth. To investigate the relationship between foreign trade and economic growth, this essay begins with an examination of the correlation & integration properties of the statistical data of GDP, foreign trade, consumption, investment, labor and industrial structure before and after Reformation-Opening of China, undertakes a system cointegrating analysis and exams Granger causality tests based on vector error-correction model, then carries some regressive analyses according to the causal direction of these variables.The results show that, before Reformation-Opening of China, the influences of foreign trade on economy are so unimportant because the causal relations among economic factors are so weak. After Reformation-Opening of China, there exist not only direct influences of international trade on economic growth, but also greater interactions among economic factors and the indirect influences of international trade on economic growth through consumption, investment and economic structure is more considerable than before. The direct relationship between foreign-trade and economic growth conforms to Export Multiply theory of Keynes's and the theory about import determined by economic growth endogenously. The indirect influences of export on economic growth are the same as import and both promote economic growth indirectly mainly through consumption and investment in the long-run.