International Trade and Logistics: An Empirical Panel Investigation of the Dynamic Linkages between the Logistics Sector and Trade and their Contribution to Economic Growth

Abstract

Purpose: The ultimate objective of this paper is to investigate the causal relationships between countries’ logistics performance, international trade and economic growth. Design/Methodology/Approach: We analyze the dynamic linkages among the Logistics Performance Index (LPI), trade openness as a percentage of the Gross Domestic Product (GDP), as well as the GDP growth based on a sample of 39 countries worldwide over the period 2007-2018. More particularly, we assess the significance and the direction of the detected causal effects among the three variables both in the long and the short run, using panel econometrics methodologies, namely, panel unit root tests, pooled mean group (PMG) models, and the Toda-Yamamoto approach to Granger-causality analysis. Findings: The findings support that both international trade and logistics performance constitute driving forces of economic growth. Moreover, it is demonstrated that the effects of the logistics‘ sector on international trade are not direct but only through economic growth. Practical Implications: The direction of causality is deemed quite important due to its strategic policy implications. A causal relationship running from the logistics and transport sector to trade investments in logistics and transport would cater for economic growth through increased trade. Policy makers should then adopt various policies aiming to promote or facilitate exports. Originality/Value: Causal effects and more specifically the direction of causality between the transport infrastructure and economic growth have not been sufficiently studied in existing literature. Furthermore, only few studies provide some general evidence of a positive correlation between better logistics and increased trade. In our paper, we aim to further investigate the dynamic relationships between international trade and the logistics and transport sector.