OPENNESS TO TRADE AND ECONOMIC DEVELOPMENT OF TRANSITION ECONOMIES

Abstract

The purpose of this paper is to investigate the connection between countries' openness to international trade and economic development, i.e. the standard of living of итс citizens. Given that this is a frequently researched question among economists with still open conclusions, research on this topic always sheds some new light and contributes to new conclusions on that aspect. The methodology used in the paper is a correlation analysis, where we compared different measures of openness with economic development measured by GDP per capita expressed in purchasing power parity. The sample on which we performed the analysis is 16 countries, some of which have completed the transition process like the countries of so-called New Europe, and some are still stuck in transition, such as our countries of our region. Each of these countries continues to be subject of an analysis of transition progress in the EBRD’s Transition Report. The results clearly show a strong and positive correlation between openness to international trade flows and economic development, with this relationship being stronger if we look at export flows than import flows. The conclusion is that openness has no alternative, and that the countries of the region must strengthen their export base and export performance in order to reduce the gap in relation to the countries of New Europe, for which we can easily say that have successfully completed the transition process.