An Empirical Analysis on the Impact of International Trade in Philippine Economic Growth

Abstract

This study explored the impact of international trade on the economic growth of the Philippines covering the period 1981 to 2019. The study’s objective is achieved by employing Multivariate Ordinary Least Squares Regression (with annual Real GDP as regressand, and Exports, Imports, Trade Openness, Exchange rate, Gross Capital Formation, and Foreign Direct Investment as regressors). The key findings of the study are as follows: (1) Expanding exports and continuous capital accumulation contribution to Philippine Economic growth, (2) Import-based Strategy is not applicable in the Philippine setting. Thus, imports have significant drawbacks, such as the devaluation of the peso, which has a significant and negative impact on the Philippine Trade Performance. Moreover, some diagnostics in the model were detected; (1) perfect multicollinearity and (2) non-normality of residuals.