Uncertainty Evaluation of Effects of Trade Openness on Economic Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach

Due to uncertainty in economic growth theories, existence of various proxies for effective factors on economic growth, and lack of indication of the most appropriate econometric model for investigating effective variables on economic growth, the empirical growth regressions have always faced uncertainty. To investigate this phenomenon, we should move from the classical econometrics towards the approaches which can appropriately deal with uncertainty. One of these approaches is the! Bayesian Averaging of Classical Estimates Approach" which has been used in this article to evaluate the uncertainty of the effects of trade openness on economic growth in developing countries (52 countries) during 1970 and 2006. The research findings indicate that the! Composite Trade Intensity" which is considered as a suitable alternative for trade openness, has a positive and definite effect on economic growth of these countries in the long run. Furthermore, it is revealed that other criteria such as! Unweighted Averages of Tariff Rates",! Terms of Trade Growth" and! Sachs & Warner openness indicator" (1995) # as proxies for trade openness # do not have definite and determining effects on economic growth of these countries in the long run.