FINANCIAL CRISES, FREE TRADE AGREEMENTS AND ECONOMIC GROWTH: ANALYSIS OF UPPER MIDDLE INCOME ECONOMIES
FİNANSAL KRİZLER, SERBEST TİCARET ANLAŞMALARI VE EKONOMİK BÜYÜME: ÜST ORTA GELİRLİ EKONOMİLERİN ANALİZİ

Author : Mehmet Ali DEMİR
Number of pages : 482-495

Abstract

The aim of this work is to assess the way in which financial crises effect on economic growth in upper middle income countries, depending on their openness of trade. It further focuses on whether a variety of free trade agreements (FTAs) can help in mitigating the impacts of financial crises, by absorbing shocks in FTA partner countries. I estimate the model a fixed effects estimator for 42 upper middle income economies for the 1980-2013 periods. The main results of the paper can be summarised as follows. First, financial crises (defined as banking, currency, or debt crisis) and currency crisis have a negative and significant impact on growth in all sample economies. Second, FTA is positively correlated with growth in upper middle income countries. Third, the interaction term between financial crises and FTA has a positive but insignificant impact on economic growth. On the other hand, when I interact the EU crisis with free trade agreements as in the case of the EU, the EU crisis brings a significant negative spill over effect to upper middle income countries when a FTA is in place.

Keywords

economic growth, financial crises, free trade agreements, trade openness.

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