Integration between Regional Economics and International Trade

Integration between Regional Economics and International Trade

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As portrayed by (Dogruel and Karahasan) there exists a growing interest in the integration between regional economics and international trade. With the contributions of new economic geography, different dimensions of the obvious regional variation of economic activity and economic growth have been explained on the grounds of importance of location and in terms of the geographic proximity. Thus, the framework demonstrates the fact that identification of the major motivations or obstacles of regions as somehow affecting the decisions of productive units has become an important issue as (Dogruel and Karahasan) explain. As (Dogruel and karahasan) continue, the MENA region consists of economies which have diverse policy preference. A set of models have been constructed and estimated to explore the differentiation of business environment in the MENA region. The findings portray that the growth of world GDP, GDP growth of MENA region, growth of world export volume and growth of MENA trade volume have no substantial effect on the industrial value added growth in the MENA countries. On the other hand, as (Dogruel and Karahasan) continue, coefficients growth in the national export and change in the domestic consumption have been present in all models.
As (Dogruel and Karahasan) emphasize financial development which refers to as the change in money supply does not show any sign of significance whereas, the credit taken into account by private sector is considered as one of the most crucial determinants of the improvement in the business environment. Meanwhile, inflation rate which has not been taken as the explanatory variable with the financial development indicators because of possible multi-collinearity problems portray signs of instability for industrial value added (Dogruel and Karahasan). And, in order to be able to have control over the effect of oil, two different models have been recognized. Although oil reserves have no significant effect on the development of the business environment an increase in fuel exports would impose significant effect on the business sector. (Dogruel and Karahasan) conclude by explaining that both domestic and external demands, openness, financial deepening, the regional and global trends , as well as oil production and oil reserves are factors which would affect the business environment significantly. The static and dynamic panel data models which have been computed portray that both the domestic and external demand are the most important reasons for the positive progress present of the business environment. The findings have also demonstrated that the inflation reduces the progress of the business sector.

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And the coefficient which is estimated for the credit used by the private sector can be recognized as the signal of increasing financial distress (Dogruel and Karahasan).
Meanwhile as (OECD 2012) portray, in order to reach job creation and higher economic growth potential, entrepreneurs as well as enterprises would need a sound business environment. This can be achieved through the existence of efficient and unbiased market and political institutions to ensure that the most competent and innovative entrepreneurs would have the opportunity to compete. Other important factors include the presence of financial sectors which would comply with the requirements of SMEs and entrepreneurs, possessing efficient labor force as well as the existence of proper infrastructure. However, the business environment in MENA economies are viewed as less effective in business creation and development than in developed economies (OECD 2012).

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