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uction.(Harrison 1996)

Theoretically, it has long been argued in the literature that trade affects long‐term growth through multiple channels. International trade would allow countries to higher specialization in areas where they possess comparative advantage, expand potential markets and allow firms to take advantage of economies of scale, enable the diffusion of technological innovation and frontier managerial practices through stronger interactions with foreign firms and markets (Grossman and Helpman 1992) , and reduce incentives for firms to conduct unproductive rent‐seeking activities through higher market competition.(Loayza and Soto 2002; Calderón and Poggio 2010)

Rivera-Batiz and Romer (1989) and Grossman and Helpman (1989) have recently constructed rigorous models in which technology is produced in profit maximizing firms. They show that openness to international markets can increase the growth rate of technology by increasing the size of the market available to technology producers and allowing those countries with a comparative advantage in technology production to specialize in this key industry. Romer (1986, 1990) also notes that international trade ray improve domestic productivity and economic growth by increasing communication with and therefore 'knowledge spillovers' from trading partners(Levine and Renelt 1991)

The endogenous growth model also emphasize on the importance of financial openness as implication of globalization. Investment of foreign companies in poor countries can bring with them required equipments and educated engineers and managers (Gordon 2000 p.306).

Financial globalization has direct and indirect effects on economic growth. It can supplement domestic saving [1] , increase levels of physical capital per worker, and help the recipient country raise its rate of economic growth and improve living standards. These potential benefits can be particularly large for some types of capital inflows, most notably foreign direct investment (FDI). (Agenor 2001)

It also enhances economic growth through three indirect channels. FDI may facilitate the transfer or diffusion of managerial and technological know-how--particularly in the form of new varieties of capital inputs--and improve the skills composition of the labor force as a result of “learning by doing” effects, investment in formal education, and on-the-job training (Grossman and Helpman 1991; Borensztein, De Gregorio et al. 1998)

In addition, financial openness induces competition in the product and factor markets that cause reduction in profits of local firms, spillover effects through linkages to supplier industries may reduce input costs, raise profits, and stimulate domestic investment (Agenor 2001).

Another channel through which international financial integration may affect positively the rate of economic growth is through its effect on total factor productivity.

In fact, the liberalization of international portfolio capital flows may lead to higher rates of economic growth because it may tend to accelerate the development of domestic equity markets and that, it turn, may lead to increased factor productivity. (Levine 2001)

Globalization through, trade and financial, is one of the important policies that can affect on the saving and capital formation with endogenous technological change and hence affect on the equilib