Journal Article

Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985

Dollar, David

1992

Overview

A technique is developed for estimating a cross-country index of real exchange rate distortion, and the procedure is implemented for 117 countries over the 1976-1985 period. The measures of real exchange rate distortion and variability are then used to address the question of whether outward-oriented economies grow more rapidly than inward-oriented economies. The findings indicate that Asian developing economies are more outward-oriented than their counterparts in Africa and Latin America and that outward orientation is highly correlated with per capita gross domestic product growth in the sample of 95 less developed countries (LDC). The results strongly imply that trade liberalization, devaluation of the real exchange rate, and maintenance of a stable real exchange rate could dramatically improve the growth performance in many poor countries. The estimated gains of adopting an Asian level of outward orientation and real exchange rate stability are 1.5% in per capita growth in Latin America and 2.1% in growth in Africa.

• Publisher: University of Chicago Press,Univ. of Chicago Press,University of Chicago, acting through its Press
• Subject: 1976-1985 / Comparative studies / Developing countries / Distortion / Economic development / Economic growth / Economic growth rate / Economic indicators / Economic indices / Economic models / Economics / Endowments / Entwicklungsländer / Export policy / Foreign exchange rates / Free trade / GDP / Gross Domestic Product / Investment rates / LDCs / Less developed countries / Liberalization / Offene Volkswirtschaft / Price levels / Real exchange rates / Studies / Trade liberalization / Wirtschaftswachstum