The Relationship between Trade Openness, Economic Growth, Exchange Rate and Tariff Rate: Evidence from Northeast Asia

Abstract

The article aims to investigate the relationship between trade openness, economic growth, exchange rate and tariff rate in three Northeast Asian countries between 1998 and 2017 using a vector autoregressive model. We found that GDP growth rate has a positive relationship with trade openness. Tariff rate positively affects both GDP growth rate and exchange rate. However, trade openness has a negative effect on exchange rate. We also found that there is a directional relationship running from trade openness to GDP growth rate and exchange rate; and from exchange rate to trade openness and tariff rate. There is a long run relationship among variables. Lastly, policies are recommended to accelerate economic growth and trade openness in Northeast Asia.