Growth and openness: empirical evidence from Bangladesh
AbstractThe study seeks to investigate empirically the direction and shape of causality among trade openness, investment and economic growth using data for Bangladesh during the period 1980-2006. Although in most cases, statistically reliable evidence of cointegration is sufficient to testify the existence of a long-run relationship among the variables of a particular model, Granger causality test provides a more dependable tool for determining the direction of the causality in particular. In order to achieve the objective of the study, modern econometric methodologies such as unit root tests; cointegration tests; and the Granger causality tests have been applied across all the variables of our model using a trivariate framework of regression equations. The test results indicate that there exists a long-run equilibrium relationship between trade openness, national income growth and total investment. Furthermore, empirical results of Granger causality confirm that there exists unidirectional causality between economic growth and investment; between trade openness and economic growth; and between trade openness and investment. The results, however, support the conventional presumption about the relationships between economic growth and investment; and between trade openness and economic growth while contradicts with that between trade openness and investment.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 35732.
Date of creation: 27 Sep 2008
Date of revision:
openness; trade liberalisation; GDP; national income; economic growth; investment; trivariate causality tests; unit root test; cointegration; long-run equilibrium relationship; Granger causality;
Find related papers by JEL classification:
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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