Trade Liberalization in Sri Lanka: Effects on Exports and Imports

This paper examines the process of Sri Lanka’s trade liberalization and its impact on exports and imports. The primary objective of the study is to estimate impact of trade liberalization on exports and imports of Sri Lanka. Secondary data is used to estimate effects of trade liberalization on exports and imports for the period from 1970 to 2011. In estimating impacts of trade liberalization on export and import sectors total time period is divided into two sub periods of before trade liberalization i.e. (1970-1977) and after trade liberalization i.e. (1977-2011). The study mainly employs simple and multiple regression models to disentangle trade effects. The main empirical results suggest that total exports and imports have grown at a higher rate during the closed economic era than in the open economic era. Further, the study finds that trade liberalization has increased imports by more than exports in Sri Lanka.