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Capital Flows and Economic Growth: What Roles Does Trade Liberialisation Play?

Author

Listed:
  • Soliu Bidemi Adegboyega

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Ogun State, Nigeria)

  • Temidayo Oladiran Akinbobola

    (Department of Economics, Faculty of Social Sciences, Obafemi Awolowo University, Osun State, Nigeria)

  • Felix O. Ajayi

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Ogun State, Nigeria)

Abstract

This paper explores by re-examining to what extenttrade liberalisation has contributed to the capital inflows (both the private capital inflows and public capital inflow) on economic growth; and their interactive relationship in Nigeria between 1985 and 2018. Time series for each of the variables were collected from secondary sources on yearly basis, extracted from World Development Indicators (WDI) and the variables were measured as percentage of GDP, while Autoregressive Distributed Lag (ARDL) technique is used to show the extent to which the variables were co-integrated and established that both private capital inflows and public capital inflows with the helps of trade liberalization inhibited economic growth in Nigeria.The study further revealed that the coefficient of error correction was negative and highly significant, as well as establishing long-term cointegration.Also, our study affirms partial existence of Bhagwati's hypothesis. Hence, the government needs to restructure and re-engineer most of its trade policies, in order to significantly impact various forms of foreign capital inflows, and subsequently enhance economic growth by creating an enabling economic environment to facilitate adequate inflows of capital inflows.

Suggested Citation

  • Soliu Bidemi Adegboyega & Temidayo Oladiran Akinbobola & Felix O. Ajayi, 2021. "Capital Flows and Economic Growth: What Roles Does Trade Liberialisation Play?," Business & Management Compass, University of Economics Varna, issue 1, pages 26-44.
    • Handle: RePEc:vrn:journl:y:2021:i:1:p:26-44
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    More about this item

    Keywords

    Capital inflows; Trade Liberalisation; Economic Growth; Time Series; ARDL;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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