The Openness Growth Monitoring Model (OGM-Model)

Abstract

This research will present a new methodology on the study of openness or trade liberalization. This paper is divided into three parts. The first part reviews the literature on analytical methods evaluating Openness based on three different approaches focusing on political economy, economic theory, and trade policy. The second part will present a new model of analysis to evaluate the trend, vulnerability and harmonization of Openness Growth. The relationship between Openness Growth and Income Growth is based on a new group of indicators and a new type of graph (see graph 2). This new model of analysis is entitled The Openness Growth Monitoring Model (OGM-Model).

The OGM-Model is based on a series of steps/elements in its application to study Openness Growth and Income Growth: (i) Degree of Openness Growth Rate by Production Sectors (Oi), (ii) Vulnerability of Openness Growth Rate (OV), (iii) Harmonization of Openness Growth Rate (HO), (iv) Openness Growth Diamond Diagram, (v) Openness Growth Rate (OG), (vi) Per-capita Gross National Income (Y) and (vii) Income Growth Rate, (viii) Openness/Income Growth Rate (O/Y) Diagram and (ix) Openness/Income Growth Rate (O/Y) Sensitivity Analysis (See Diagram 1).

The objective of the OGM-Model is to offer policy-makers and researchers new analytical tools to study the impact and trend of openness in the economy of any country from a new perspective. The OGM-Model application is not limited to the study of a special group of countries or regions. It is not constrained by issues about the region or the development stages of any country. OGM-Model, in effect, is a simple and flexible scheme.

The third part of this paper shows the results obtained in the application of OGM-Model in different countries and regions. The OGM-Model's general objective is to measure the evolution, vulnerability, and openness growth of any country. The period of study is from 1995 to 2001 and the reason to select this short period is to observe the rapid changes in openness growth and income growth.

Keywords: Openness growth, trade liberalization, income growth, economic modeling

JEL Classification: C43, F15