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Do political institutions influence international trade? Measurement of institutions and the Long-Run effects

Author

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  • Krenz, Astrid
Abstract
The past literature presents ambiguous evidence about the bidirectional and causal influences between countries´ institutional framework and their trading activity. In our analysis, we investigate the relationship between institutions and trade constructing a measure of institutions from the information given by the International Country Risk Guide and using a methodology that can control for omitted variables bias, endogeneity in the regressors, as well as cross-country heterogeneity. We examine the long-run effects of the political institutional framework on trade for a panel of 87 countries for the period from 1990 to 2007. We employ recent panel econometric methods for testing and estimating in the presence of non-stationarity, investigate panel causality and use methods that are robust to slope heterogeneity. Our results imply that an improved political institutional framework is a cause of increased trading activity.

Suggested Citation

  • Krenz, Astrid, 2016. "Do political institutions influence international trade? Measurement of institutions and the Long-Run effects," University of Göttingen Working Papers in Economics 276, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:276
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    References listed on IDEAS

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    Cited by:

    1. Arief Bustaman & Rina Indiastuti & B. Budiono & Titik Anas, 2022. "Quality of Indonesia’s domestic institutions and export performance in the era of global value chains," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-29, December.
    2. Burcu Ozcan, 2018. "Information and communications technology (ICT) and international trade: evidence from Turkey," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(1), pages 93-113, April.
    3. Abban, Stanley, 2020. "The Prospect of the Proposed Currency Union on Intra-regional Trade: Southern African Customs Union," MPRA Paper 103123, University Library of Munich, Germany.
    4. Abban, Stanley, 2020. "Institutions, Infrastructure and East African Community Membership of Burundi and Rwanda on Trade," MPRA Paper 100654, University Library of Munich, Germany, revised 10 May 2020.
    5. Abban, Stanley, 2020. "The impact of institutions and infrastructure on intra-regional trade: The Economic Community of West African States," MPRA Paper 104382, University Library of Munich, Germany.
    6. Rabah Amir & Hend Ghazzai & Rim Lahmandi-Ayed, 2020. "On the Political Economy of Free Trade," Working Papers hal-02506064, HAL.

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    More about this item

    Keywords

    political institutions; international trade; panel co-integration; cross-country heterogeneity;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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