IDEAS home Printed from https://ideas.repec.org/a/dug/actaec/y2014i6p99-113.html
   My bibliography  Save this article

Capital Inflow and Economic Growth Nexus in Nigeria: The Role of Trade Openness

Author

Listed:
  • Olufemi Saibu

    () (University of Lagos)

Abstract

The paper examined the effects of capital inflow on economic growth and also investigated the role of trade openness in foreign capital inflow/growth nexus in Nigeria. This is with a view to testing modernization hypothesis in Nigeria. The paper adopted the Principal Component Analysis (PCA) technique to derive a unique index that captures the quantity and quality of the conventional measures of capital inflow along with trade openness. The method has been used in other studies but not yet applied to capital inflow versus growth analysis. The time series properties of the data were examined and Autoregressive Distributed Lag (ARDL) bound testing methodology was used to analyze the time series data. The result showed that capital inflow when interacted with trade openness had significant impact on growth, thus providing empirical support for the modernization hypothesis that capital inflow and trade policy are complementary and growth enhancing. The paper concluded that trade liberalization policies tend to enhance effectiveness of capital inflow and jointly promote higher economic growth in Nigeria.

Suggested Citation

  • Olufemi Saibu, 2014. "Capital Inflow and Economic Growth Nexus in Nigeria: The Role of Trade Openness," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 10(6), pages 99-113, December.
  • Handle: RePEc:dug:actaec:y:2014:i:6:p:99-113
    as

    Download full text from publisher

    File URL: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/2585/2308
    Download Restriction: no

    References listed on IDEAS

    as
    1. Neelesh Gounder, "undated". "2012-11 Financial development and economic growth in Fiji: New empirical evidence," Discussion Papers in Economics economics:201211, Griffith University, Department of Accounting, Finance and Economics.
    2. Muhammad Javid & Abdul Qayyum, 2010. "Foreign aid-growth nexus in pakistan: role of macroeconomic policies," Economics Bulletin, AccessEcon, vol. 30(4), pages 1-31.
    3. Mete Feridun & Selami Sezgin, 2008. "Regional Underdevelopment And Terrorism: The Case Of South Eastern Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(3), pages 225-233.
    4. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    5. Li, Xiaoying & Liu, Xiaming, 2005. "Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship," World Development, Elsevier, vol. 33(3), pages 393-407, March.
    6. Tokunbo S. OSINUBI & Lloyd A. AMAGHIONYEODIWE, 2010. "Foreign Private Investment And Economic Growth In Nigeria," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 5, pages 105-127, June.
    7. Kumar, Ronald R., 2010. "Impact of trade openness, remittances, capital inflows & financial development on income in Vanuatu," MPRA Paper 33221, University Library of Munich, Germany.
    8. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
    9. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    10. Bichaka Fayissa & Christian Nsiah, 2010. "The Impact of Governance on Economic Growth: Further Evidence for Africa," Working Papers 201012, Middle Tennessee State University, Department of Economics and Finance.
    11. Kasuga, Hidefumi, 2007. "Evaluating the impacts of foreign direct investment, aid and saving in developing countries," Journal of International Money and Finance, Elsevier, vol. 26(2), pages 213-228, March.
    12. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    13. Akinlo, A. Enisan, 2004. "Foreign direct investment and growth in Nigeria: An empirical investigation," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 627-639, July.
    14. Jamshid Damooei. & Tavakoli, Akbar., 2006. "The Effects of Foreign Direct Investment And Imports on Economic Growth: A Comparative Analysis of Thailand and the Philippines (1970-1998)," Journal of Developing Areas, Tennessee State University, College of Business, vol. 39(2), pages 79-100, January-M.
    15. Jalil, Abdul & Feridun, Mete & Ma, Ying, 2010. "Finance-growth nexus in China revisited: New evidence from principal components and ARDL bounds tests," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 189-195, April.
    16. Blanca Sanchez-Robles, 1998. "Infrastructure Investment And Growth: Some Empirical Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 16(1), pages 98-108, January.
    17. Abu Nurudeen, Obida Gobna Wafure & Elisha Menson Auta, 2011. "Determinants of Foreign Direct Investment: The Case of Nigeria," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(3), pages 50-67, August.
    18. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    19. Burke, Paul J. & Ahmadi-Esfahani, Fredoun Z., 2006. "Aid and growth: A study of South East Asia," Journal of Asian Economics, Elsevier, vol. 17(2), pages 350-362, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ozoemena Stanley Nwodo & Fredrick Onyebuchi Asogwa, 2017. "Global Integration, Non-Oil Export and Economic Growth in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 3(1), pages 59-67, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dug:actaec:y:2014:i:6:p:99-113. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daniela Robu). General contact details of provider: http://edirc.repec.org/data/fedanro.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.