The present study examines the different elements that impact trade openness, recognizing the drivers that encourage countries to become more integrated into the world economy and the inhibitors that erect obstacles and reservations.
A group of 18 emerging countries are used in the analysis. Panel data technique, Driscoll–Kraay standard error test that is robust to cross-section dependence and heterogeneity is employed to carry out the empirical analysis for 1996–2022.
The main findings of the study are that economic growth, financial development, institutional quality, and foreign direct investment positively affect trade openness. However, exchange rate, world uncertainty index, and geo-political risks significantly and adversely impact trade openness.
The findings of the study suggest that policymakers in emerging economies need to take the necessary actions to liberalize their trade regimes through effective macroeconomic management to achieve long-term growth. Moreover, the study also provides future directions for the researchers.
Understanding the dynamics of trade openness is necessary to appreciate the intricate interplay of political, socio-cultural, and economic forces that facilitate or hinder a nation’s participation in international trade. Therefore, the study contributes to the existing literature by jointly examining the stimulating and deterrent factors of trade openness within a unified empirical framework for emerging economies, a perspective seldom analyzed together in prior works.
