Analyzing the Relationship Between Trade and Economic Growth

Abstract

This paper examines how a country’s amount of total trade spurs economic growth within countries. The paper will analyze how the total trade activity, measured as the combined level of exports and imports, impacts economic growth, measured as changes in GDP per capita. The model is expanded to include a country’s amount of foreign direct investment, gross savings, unemployment level, amount of manufacturing in the economy, and the country’s overall status as a developed or developing economy as other potential factors and influencers of economic growth. The final model indicates that the most important influencers of economic growth are foreign investment, savings, unemployment, and the country’s development level.