Effects of the non-oil trade balance on ecuadorian economic growth, period 1996-2021

Abstract

In Ecuador, the non-oil trade balance is an important variable because it records the purchase (imports) and sale (exports) of raw materials such as bananas, coffee, shrimp, and roses, which allows determining the prosperity, recession, or economic decline of the non-oil sector. Due to this importance, the present research is developed with the objective of "analyzing the effect of the non-oil trade balance in the Ecuadorian economic growth during the period 1996 - 2021" for the analysis we used data from official sources (BCE and World Bank), with which a "log-log" model was elaborated, on the other hand, using the function of the "log-log" model. On the other hand, using the Cobb Douglas production function, it was determined whether the Non-oil Trade Balance generates increasing or decreasing returns to scale. 

One of the theories that justify the development of this research is "Thirlwall's Law", whose specification describes the behavior and variation of exports and the income elasticity of imports as a function of economic growth. The econometric analysis was carried out using the Stata program, which showed important results showing that the non-oil trade balance (Exports and Imports) is significant and presents an important contribution within the Ecuadorian economic growth, on the other hand, imports influenced more than exports within it, however, according to the Cobb Douglas production function, the non-oil trade balance generates an economy with diminishing returns to scale.