Trade liberalisation and the balance of payments in selected developing countries

This paper analyses the impact of the reduction of tariff and non-tariff barriers on the trade balance and the current account of the balance of payments of 22 selected developing countries from Africa, Latin America, East Asia, and South Asia. The study presents estimates of dynamic panel data models and time-series/cross-section models. The main findings are that trade liberalisation has worsened the balance of trade and the balance of payments, because imports have increased more rapidly than exports. However, the impact of liberalisation and other variables varies according to region and the nature of the trade policy regime.