Magnetic Macro Drivers of Trade Openness: A Study of MENA Countries

The purpose of this research is to systematically scrutinise the influence of macro determinants on trade openness, through the lens of various trade theories, with a particular focus on the economies of the Middle East North African countries from 1995 to 2023. The analysis uses advanced panel regressions, stepwise regression for model selection, fully modified ordinary least squares, Pooled ordinary least square, and fixed effects method. The long-run dynamics were tested using Pedroni cointegration, while Granger causality testing was used to examine the causal direction between the trade openness and trade drivers. The results show both long-run and short-term relationships between trade openness and (i) human capital, (ii) gross national savings, (iii) foreign direct net flow investment and (iv) exchange rate. The researchers also detected unidirectional and bidirectional causality relationships between trade openness to these four factors. The study also revealed that gross national savings emerge as the most influential driver of trade openness, and the exchange rate does not exhibit economic significance concerning the trade openness of Middle East North African countries.