Trade liberalization and lagged reactions of trade flows, productivity and internal demand: an application to the Australian PMV industry
A literature review regarding the consequences of trade liberalization on trade flows, productivity and internal demand has led us to consider a simple operational model of how to measure these consequences. This model is applied to the passenger motor vehicle (PMV) industry in Australia. There is clear evidence that this liberalization has increased the volume of trade and productivity, but reduced the locally produced cars for internal consumption. In addition, there are significant estimated lags concerning the reaction of these variables as a consequence of trade liberalization. Econometrically, this paper is an application of the bounds testing procedure based on the Autoregressive Distributed Lag (ARDL) approach to cointegration.