CAUSALITY TESTING BETWEEN TRADE OPENNESS, FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: FRESH EVIDENCE FROM SUB-SAHARAN AFRICAN COUNTRIES
Loading...
Date
2018
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
ECONOMIA INTERNAZIONALE
Abstract
Previous works are yet to reach a consensus about the direction of causality between Trade
Openness (TO), Foreign Direct Investment (FDI) and Economic Growth (EG), in particular,
using a panel data analysis for Sub-Saharan African (SSA) countries. This study adopts first and
second generation econometric methods to analyse the relationships between trade openness,
FDI and economic growth in Sub-Saharan Africa countries over the period 1980-2016. The
Westerlund cointegration, the Common Correlated Effect Mean Group (CCEMG), and the
Bootstrapp Granger causality econometric techniques were adopted. Findings show there is a
cross-sectional dependence among the 23 SSA countries examined. A long-run cointegration
among trade openness, FDI and economic growth also exists. A positive and significant
relationship exists between trade openness and economic growth. FDI indicates a positive and
significant relationship with economic growth. The panel error correction term (ECT) result
further confirmed the long-run relationship among the variables. A bidirectional causal
relationship exists among trade openness, foreign direct investment net inflows and economic
growth for Gambia, Senegal and South African countries. As part of our policy
recommendations, SSA government should promote trade openness by reducing or eliminating
trade tariff and non-tariffs that can limit the economic activities in the region.
Description
Staff Publications
Keywords
FDI,, Real GDP per capita,, Pooled Mean Group,, Trade Openness