ABSTRACT
This chapter reviews on the relationship between trade openness and gross domestic product (GDP) growth volatility. It explains the methodology utilized in this study to test the relationship between trade openness and GDP growth volatility. The chapter examines this hypothesis, subject to a number of control variables, notably political and economic governance. The approach used to test this relationship is the regression method, using panel data. In the literature, the procedure used to estimate the relationship between openness and volatility is generally the regression method, often utilising panel data. The economies of small states are generally characterized by a high degree of trade openness, meaning that they are likely to be associated with a high degree of to growth volatility. The chapter discusses the estimation results and reports on some diagnostic tests relating to the validity of the results. It concludes the study and puts forward a number of implications that are derived from the results of growth volatility.
