Determining Macroeconomic Factor of Trade Policy: An Empirical Analysis of South Asia

Abstract

Trade policy debate surrounds within three major uncommon issues. One of them has investigated “whether export-oriented or import-substitutes policies lead to higher-level of economic growth”. The mainstream of research is to contribute in the field of international trade by analyzing the influence of potential variable. We measured the variable in favor of China’s growth with Hausman model which detects endogenous regressor and gives a more precise choice of accuracy in model selection. Pooled OLS regression model, the fixed effect of LSDV and random effect have been applied to see the relationship. The research output presents evidence of trade and exchange rate is positively correlated with economic growth. However, the existence of some neglected trade barriers in South Asian region which may cause to discourage trade openness and unwelcomed to FDI. The output tends to recommend potential feedback to liberalize trade and positively stress on FDI between neighboring countries that have high economic prospects.