Impact Of International Trade On Economic Growth

There has been a heated debate by different researchers,which has been going on for several decades on whether international trade plays a prominent role in promoting economic growth.Some historical and current validation has revealed that internationally active countries tend to be more productive than countries which only produce for the domestic market.As such to confirm the conceptual review the research carried out an investigation with a focus on analyzing the impact of international trade on economic growth between China and the CLMVT countries.Thus as China continues to maintain an average yearly growth rate of 6.5%coupled with an increase in GDP per capita,different countries,notably from CLMVT region,have taken advantage of the new market opportunities in China,Asian Development Bank(nd).Consequently the CLMVT region trade balance experienced a strong steady growth rate,and also a yearly average GDP growth rate of 3.15%over the past decade,Asian Development Bank(nd).The impact of the association in question is expected to benefit all countries involved with China included.According to Santasombat(2015)trade development between China and the CLMVT region created new trading markets for all the countries,with China having access to manufacturing and service products market,and the CLMVT exporting and importing consumables and raw materials.Thus through international trade both countries are benefiting economically.The paper seeks to investigate:to what extent has trade contributed to the growth of the CLMVT countries.As innovative contribution to the current body of literature,the paper analyzed the impact using export and imports on economic growth,with data-time series and panel-fitted through the Instrumental Variable(IV)model and the Panel data model,respectively.By using the panel random effect model and the time series IV model,the estimated results revealed that the association between imports and CLMVT countries economic growth is statistically insignificant and negatively correlated.However,the paper concluded by stating that although the impact is statistically insignificant,imports still play a pivotal role in creating a bridge to access material which might not be found in the importing country or accessed at a high cost.Differently,exports and economic growth variables are significantly positively correlated.The estimates from the instrumental variable model revealed an asymmetric impact of trade on economic growth based on the country and also sector.