Trade policy instability index: The effect of trade policy instability on economic growth

This dissertation provides evidence on the effects of trade policy instability on economic growth. Numerous studies have evaluated trade reforms in developing countries; however, analysis of the effect of trade policy instability has been quite limited. This study argues that previous indicators offer only partial information on policy instability and develops a new Trade Policy Instability Index (TPI) as a more accurate measure. The TPI consists of three components: the commitment by the authorities to trade policy, the volatility, and consistency among trade policies. Results derived from a panel of 90 countries for the period 1970--2000 indicate that trade policy instability has a negative impact on growth. Extensive testing finds these results to be quite robust.