The Impact of Trade Liberalisation on Exports, Imports, and the Balance of Payments of Developing Countries

This paper uses panel data and times series/cross section analysis to estimate the effect of trade liberalisation on export growth, import growth, the balance of trade and the balance of payments for a sample of 22 developing countries that have adopted trade liberalisation policies since the mid-1970s. We find that liberalisation stimulated export growth but raised import growth by more, leading to a worsening of the balance of trade and payments. To the extent that this has constrained the growth of output and living standards, the findings have important implications for the sequencing and degree of liberalisation.