A cross-country study of the direct and inverse relationship between economic globalization and growth

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This study aims to explore the cross-country relationship between economic globalization and growth. It assesses the implications of globalization for the world economy and groups of countries with different income levels. The study employed panel data from the World Bank, the Fraser Institute, and the Swiss Federal Institute of Technology in Zürich for 122 countries from 1970 to 2018. Two-stage fixed effect model was used to assess the impact of globalization on growth. The reverse causality was estimated using the method of instrumental variables. The results showed that the world economy benefited from globalization. In turn, greater openness has reinforced economic growth. The study confirms that globalization benefits are distributed unequally. A significant positive impact of globalization on economic growth is confirmed for high and lower-middle-income economies with coefficients of 0.02 and 0.01, respectively. Economic growth of high-income countries is determined by financial globalization, while lower-middle-income countries rely on trade and financial openness. Negative implications of economic globalization took place in upper-middle-income countries with a coefficient of -0.02. In these countries, correlation between trade globalization and growth is -0.13. The effect of economic growth on globalization is found to be significantly positive for high-income (11.08) and upper-middle-income countries (9.62) and statistically insignificant for lower-middle-income economies.

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    • Figure 1. Direct and reverse relationship between growth and economic globalization
    • Figure 2. GDP per capita in the world and the KOF index
    • Figure 3. Scatter diagram of GDP per capita and globalization indices
    • Table 1. Description of variables
    • Table 2. Mean 5-year values of GDP growth and KOFE across income groups
    • Table 3. Mean values of GDP growth with respect to economic globalization
    • Table 4. GDP and globalization: a direct link (1970–2018)
    • Table 5. GDP and globalization: feedback (1970–2018)
    • Table A1. Summary of variables in empirical studies on globalization-growth relationships
    • Table B1. GDP per capita, growth and KOF indices of globalization by income groups
    • Table C1. Correlation coefficients between real GDP growth and KOF indices of globalization
    • Data curation
      Oleksiy Khoroshun
    • Formal Analysis
      Oleksiy Khoroshun, Hanna Olasiuk, Vira Rokocha, Sanjeev Kumar
    • Funding acquisition
      Oleksiy Khoroshun, Hanna Olasiuk, Vira Rokocha, Sanjeev Kumar
    • Investigation
      Oleksiy Khoroshun, Hanna Olasiuk, Vira Rokocha, Sanjeev Kumar
    • Methodology
      Oleksiy Khoroshun, Vira Rokocha, Sanjeev Kumar
    • Resources
      Oleksiy Khoroshun, Hanna Olasiuk, Sanjeev Kumar
    • Software
      Oleksiy Khoroshun, Hanna Olasiuk
    • Validation
      Oleksiy Khoroshun, Vira Rokocha, Sanjeev Kumar
    • Visualization
      Oleksiy Khoroshun, Hanna Olasiuk
    • Writing – original draft
      Oleksiy Khoroshun, Hanna Olasiuk, Vira Rokocha
    • Conceptualization
      Hanna Olasiuk, Vira Rokocha
    • Writing – review & editing
      Hanna Olasiuk, Sanjeev Kumar
    • Project administration
      Vira Rokocha
    • Supervision
      Vira Rokocha, Sanjeev Kumar