Notes on trade and growth

The theoretical and empirical connections between economic growth and trade have been discussed in economics for a long time This link, however, has been proved empirically to be weak, as there is little evidence about the role of trade in economic growth and development. Taking into consideration this fact, the aim of this paper is to study the relationship between trade and growth. The central question to be addressed is the causal relation running from trade to growth, or, more specifically, the theoretical relationship between trade and growth. Two aspects will be taken into consideration, namely, the relationship between trade and growth and Balance of Payments problems and their relation with macroeconomic policy. The theoretical literature used in this paper will analyze the channels between trade and growth in both directions. The purpose is to assess the causality running from trade to growth.