Trade Competitiveness Determinants in Emerging Markets and Developed Countries

Abstract

Trade flow is an essential stimulus to facilitate the economic development of emerging markets. Some of the major challenges for many countries around the globe include promotion of international trade and competitiveness, as well as optimisation of economic policies to increase trade flows. The aim of this study was to investigate the effects of macroeconomic and country-specific indicators on trade flows in the fast emerg­ing markets of Brazil, Russia, India, China and South Africa (BRICS), developing Asian countries, and developed countries. This study employed cross-sectional fixed effect panel data analysis for the period between 1981 and 2010 to reveal significant empirical evi­dence. Findings confirmed that trade flows in BRICS can be modeled as a function of ex­change rate, economic growth, unemployment rate and government budget balance. The important drivers of trade flows in the developing Asian countries were economic growth, interest rate and government budget balance. The trade flows in developed countries were determined by economic growth, inflation rate, interest rate, government budget balance, wage rate and stock market performance. Comprehensive results from this study provide evidence that macroeconomic variables and country-specific indicators are significant de­terminants of trade flows.