Unraveling the Interplay between Trade Openness

Abstract

Aim: The impact of trade openness on the economic development of countries is a subject that needs to be investigated. The aim of this study is to investigate the relationship between opennesstotal energy consumptionrenewable energy consumptiongovernment expenditureand economic growth in Iran between 1980-2023. Method: In this studyshort and long term coefficients were estimated using the ARDL bounds test. Additionallythe cointegration relationship between the variables was analyzed using the Hacker and Hatemi-J (2006) cointegration test. Findings: Empirical findings show that trade openness has a positive contribution to economic growth in the short and long term. Moreovertotal energy consumption increases economic growth. Howeverthe effect of renewable energy on economic growth is statistically insignificant. Additionallygovernment expenditure positively affects economic growthwhich is supported by the Keynesian perspective. According to the bootstrap causality analysis resultsthere is a two-way causality relationship between trade openness and economic growth. In additiongovernment expenditure is the causal of economic growth. Conclusion: As a result of the findingsit is recommended to increase trade openness in Iran and to produce policies that will bring new international agreements and trade associations.