This summary was prepared by classmates and may not cover all the material on the exam.
Outward oriented Developing Economies Really Do Grow More rapidly: Evidence from 95
Topic: Te article talks about how an outward oriented country has a bigger growth rate than
those inward oriented countries
Purpose: The author wants to prove that growth rates in developing countries are higher in
outward oriented economies rather than inward oriented economies. He proves so by
analyzing the main differences in countries which grew more rapidly assist those which did
not, like Latin America and African states.
Motivations: the author found out that outward oriented economies that are economies
which had a stable exchange rate as well as high exports and the sustainability of imported
goods and machinery accelerate growth.
Outward orientation means a combination of two factors:
 Level of protection specially for inputs
 The level of the real exchange rate
Methodology: Since the level of protectionism is difficult to measure he uses a value of a
goods basket and compares it in US currency and one in non US currency. If the country
has a high level of prices it means it is an inward oriented economy (more protectionism)
and he proves how this affects the growth rate against those in the outward economies
which have lower prices.
Orientation is measured as deviation from the regression line of the country located above
it has higher price levels that can be justify by its endowment and it is taken to be
relatively inward oriented. Measured of orientation depends heavily on the choice of
specification. Developed countries are less distorted than the majority of developing
countries. The explanation is based on errors in price data and relevant country
characteristics that are difficult to control. Several countries with high price levels are
densely populated.
Here he used a linear and cross sectional regression data craned out on 95 developing
countries. The is also a sentitity analysis that says than an outward oriented developing
countries grow more rapidly and that relevance to the poorest countries with real exchange
rate distortion explains variations in growth rates.
Data compiles by Summer and Heston shows how Asian developing economies are more
outward oriented than the African and Latin American once.
In a scale of prices Asian countries could be categorized on a low price levels and Latin
American could be classified into a moderately high prices level while African economies
would be on a extremely high one.
High prices reflect strong protection, incentives going to domestic producers while low
prices show modest protection and incentives oriented the external markets.
The also say that Asian economies show a low variety of the real exchange rate distortion
measures while Latin American one show a high level.
They concluded that the outward orientation is highly correlated with per capita GDP
growth. Trade liberalization, devaluation of the real rate and a stable exchange rate can
improve the growth performance in poor countries.