THE CAUSALITY RELATIONSHIP BETWEEN TRADE OPENNESS AND ECONOMIC GROWTH: THE CASE OF IRAN 1995-2014 PERIOD

Abstract

Trade openness is defined as the ratio of export and import sum of a country to GDP and it is expected to affect the economic growth. The aim of this study is to research the dynamic relationship between trade openness and economic growth with the quarterly data of the 1995-2014 periods. The existence of dynamic relationship between variables was researched with the causality tests, based on Vector Autoregressive Model (VAR) and VAR with increased lag. Whereas the results of econometric analysis state that economic growth is the Granger cause of trade openness, a causality relationship from trade openness to economic growth could not be found.