Degree Name

Master of Arts (MA)

Semester of Degree Completion

1999

Thesis Director

Minh Q. Dao

Abstract

Openness offers countries opportunities to trade with the outside world, and stimulates growth through easier access to new technologies and skills. In order to verify the effects of openness on economic growth in Asian economies, this study uses the ratio of foreign direct investment to GDP, and the ratio of the sum of imports and exports to GDP as proxies of openness.

This study begins with the hypothesis that opening domestic markets will have a significant positive impact on Asian economic growth, and the lower the starting level of real per capita GDP, relative to the long-term position, the faster the growth rate. The method applied to this study is ordinary least squares (OLS). The overall findings do indeed support that openness can stimulate economic growth and that there is conditional convergence in Asian economies between 1980 to 1995. However, the presence of multicollineary raises some doubt concerning the reliability of the estimated results. Nonetheless, the link between openness and growth that is apparent for the Asian economies seems to be a promising candidate for further investigation, such as, there may be a simultaneous problem between growth and international trade. So using simultaneous equations to estimate the relationship between growth and international trade may be a better approach.

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