The impact of trade and financial openness on economic growth: An empirical investigation on selected OECD countries

With the impact of globalization, the relationship between the economies of countries has increased more than ever before. Trade and financial barriers to international trade have begun to disappear. The reduction of factors limiting the circulation of factors of production has transformed the world into a global market. Every country in the world of globalization has implemented liberalization policies at its own level. In liberalization movements, superiority can be established by producing products with comparative advantages. For this purpose, companies increased efficiency by producing better quality products at cheaper prices. Efficiency gains are used to gain superiority in the competitive environment. Liberalization is evaluated in two dimensions: commercial and financial. In the literature, trade liberalization appears as trade openness as a measurable concept and financial liberalization as financial openness as a measurable concept. The main motivation behind the liberalization policies implemented by countries is to achieve the targeted growth rates and not to fall behind in the competitive race with other countries. One of the issues that modern economics has emphasized from the very beginning is growth. Growth is seen as a measurable indicator of development and competitiveness. At this point, openness has become one of the main policies that countries have to implement. In this context, the policies preferred by countries can increase welfare or make them dependent on foreign countries. Therefore, how and in what direction trade and financial openness affect growth is a research topic that needs to be closely monitored. In this study, the relationship between trade openness (the share of total imports and exports in GDP) and financial openness (the share of foreign direct investment net inflows in GDP) and economic growth was examined in 33 selected OECD countries (Austria, Australia, Turkey, USA, Germany, Belgium, Czechia, Denmark, Estonia, Finland, France, S.Korea, U.K.Kingdom, Ireland, Netherlands, Spain, Israel, Switzerland, Sweden, Italy, Japan, Canada, Colombia , Latvia, Luxembourg, Mexico, Hungary, Norway, Poland, Portugal, Slovenia, Slovakia, Greece) It is aimed to be tested empirically using data. Emirmahmutoğlu-Köse causality analysis method was used as the empirical analysis method. As a result of the study, in line with the findings, it was determined that there was a causality relationship from financial openness to growth for Italy, Norway, Australia and Latvia. A causal relationship from trade openness to growth has been found for Finland, Japan, the USA, Denmark, Canada, Norway and Estonia.