Can Trade Liberalization Stimulate Economic Growth, New Evidence from Jordan?

Abstract

Trade liberalisation and economic growth in less developed countries over the last 20 years has often been implemented with the expectation of growth being stimulated; yet the evidence on its growth enhancing effects is mixed. This study evaluates changes in economic growth that are likely to result from changes in trade policies, FDI, population and exports in Jordan. Using an application of the autoregressive distributed lag model (ARDL). Our result shows that FDI, trade policies, and exports have a various impact on economic growth in the case of Jordan. This suggests that it is possible to stimulate economic growth in Jordan through an outward-looking strategy of FDI expansion. More significantly, the results suggest the importance as well as the need for Jordan to embark on trade liberalization policies in order to improve economic growth in the current world economy.

Keywords: Economic growth, Trade, FDI, Exports, ARDL model, Jordan.