# The macroeconomic determinants of trade openness in Latin American countries: A panel data analysis

## TL;DR

This study examines factors influencing trade openness in Latin American countries from 2000 to 2020 using panel data analysis.

## Contribution

The study identifies specific macroeconomic determinants of trade openness in Latin American countries using fixed effects panel data.

## Key findings

- GDP, economic complexity index, and logistic performance index negatively impact trade openness.
- Exports of high-tech products, exports, imports, R&D expenditure, and interregional trade positively influence trade openness.
- Chile, French Guiana, and Brazil showed positive impacts due to better economic complexity and trade policies.

## Abstract

Trade openness shows a positive impact on economic growth, supported by economic theory, and export diversification and economic complexity show a positive dynamic in trade openness in the world; however, a specificity is generated in South American countries. Therefore, the objective of the research is to analyse the macroeconomic determinants of trade openness in Latin American countries.

The research approach was quantitative and explanatory using panel data methodology from the databases of the World Bank, Harvard University and the Economic Commission for Latin America and the Caribbean for the period 2000-2020.

The fixed effects panel data model showed that the variables that had a negative impact on trade openness were GDP, the economic complexity index and the logistic performance index, while the variables that had a positive impact were exports of high-tech products (a proxy for innovation), exports, imports, research and development expenditure and interregional trade in goods.

Therefore, during the analysis period of 2000-2020 in South America, based on the panel data analysis under fixed effects, a total of 8 countries had a negative impact on trade openness, and only the economies of Chile, French Guiana, and Brazil had a positive impact on trade openness; these economies are characterized by their better performance in the economic complexity index, their higher percentage of budget for research and development expenses, and their trade policies oriented towards the industrialization of their value-added products.