Trade liberalisation, governance, and the balance of payments: evidence from the Arab Maghreb Union

Abstract

ABSTRACT This paper explores the impact of trade liberalisation on the economies of the Arab Maghreb Union (AMU) as they attempt to reform their economies by liberalising trade with other nations in order to promote growth and increase welfare. We investigate the time period from 1995 to 2009 in terms of export growth, import growth, the balance of trade, and the balance of payments by using two different estimation techniques: ordinary least square, and panel-corrected standard-error models. Our empirical evidence shows that trade liberalisation did not enhance export growth in AMU countries during the given period. Trade liberalisation worsened the balance of trade and the balance of payments. Governance indicators turn out to be important factors in order to achieve the intended effects of trade liberalisation.