IDEAS home Printed from https://ideas.repec.org/a/rbs/ijbrss/v11y2022i7p178-188.html
   My bibliography  Save this article

Trade Liberalization Policy and Economic Growth in Africa: A Threshold Analysis

Author

Listed:
  • Joseph Osaro Denwi

    (Department of Economics, University of Port Harcourt, Nigeria)

  • Nenubari John Ikue

    (Department of Economics, University of Port Harcourt, Nigeria)

  • Joseph Jite Onodjaefe

    (Department of Economics, University of Port Harcourt, Nigeria)

  • Mtomabari Simeon

    (Statistics Department Central Bank of Nigeria, Nigeria)

Abstract

This paper use the dynamic growth framework to model the relationship between trade liberalization policy and economic growth of 42 African countries from 1995 to 2018. Banking on the heterogeneity of income and socioeconomic factor affecting trade policies in African countries, the paper opted for the Pooled Mean Group (PMG) technique which is sufficient for inference in a dynamic heterogeneous environment. The result tells that trade liberalization policy is beneficial to economic growth of African countries up to a certain threshold, beyond which it begins to cause the economy to under-heat. Thus, a confirmation of nonlinear relationship between trade liberalization policy and economic growth in African countries. The paper estimates a threshold value of 139.94% of total Trade to GDP; 345.32% of Export to GDP and 62.80% of Import to GDP. These findings champion that, for countries in Africa to benefit largely from trade, trade openness, export openness, and import openness should rover around the estimated threshold values. The paper documents certain conditions required to moderate the effect of trade liberalization policy on economic growth in African countries. Key Words:Trade Policy; Economic Growth; Human Mind; Threshold

Suggested Citation

  • Joseph Osaro Denwi & Nenubari John Ikue & Joseph Jite Onodjaefe & Mtomabari Simeon, 2022. "Trade Liberalization Policy and Economic Growth in Africa: A Threshold Analysis," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(7), pages 178-188, October.
    • Handle: RePEc:rbs:ijbrss:v:11:y:2022:i:7:p:178-188
    DOI: 10.20525/ijrbs.v11i7.2088
    as

    Download full text from publisher

    File URL: https://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/2088/1478
    Download Restriction: no
    File URL: https://doi.org/10.20525/ijrbs.v11i7.2088
    Download Restriction: no
    File URL: https://libkey.io/10.20525/ijrbs.v11i7.2088?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Nenubari Ikue John & Ifeanyichukwu Lucky Amabuike & Joseph Ade Ajaba & John Akin Sodipo & Linus Bamekpari Enegesi, 2020. "Financial system, trade concentration and economic growth in West African Monetary Zone (WAMZ)," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(4), pages 426-436, July.
    2. Fontagné, Lionel & Martin, Philippe & Orefice, Gianluca, 2018. "The international elasticity puzzle is worse than you think," Journal of International Economics, Elsevier, vol. 115(C), pages 115-129.
    3. Titus O. Awokuse & Ruizhi Xie, 2015. "Does Agriculture Really Matter for Economic Growth in Developing Countries?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 63(1), pages 77-99, March.
    4. Falvey, Rod & Foster, Neil & Greenaway, David, 2012. "Trade Liberalization, Economic Crises, and Growth," World Development, Elsevier, vol. 40(11), pages 2177-2193.
    5. Martin Grancay & Nora Grancay & Tomas Dudas, 2015. "What You Export Matters: Does It Really?," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(2), June.
    6. Neaime, Simon, 2015. "Twin deficits and the sustainability of public debt and exchange rate policies in Lebanon," Research in International Business and Finance, Elsevier, vol. 33(C), pages 127-143.
    7. repec:hal:spmain:info:hdl:2441/3lmdaefcr886ao8sahjmam30ke is not listed on IDEAS
    8. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    9. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    10. Grossman, Gene M & Helpman, Elhanan, 1990. "Trade, Innovation, and Growth," American Economic Review, American Economic Association, vol. 80(2), pages 86-91, May.
    11. Oluseun A. Ishola & Modinat O. Olusoji, 2020. "Service Sector Performance, Industry and Growth in Nigeria," International Journal of Service Science, Management, Engineering, and Technology (IJSSMET), IGI Global, vol. 11(1), pages 31-45, January.
    12. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    13. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    14. Stiglitz, Joseph E, 1996. "Some Lessons from the East Asian Miracle," The World Bank Research Observer, World Bank, vol. 11(2), pages 151-177, August.
    15. Baltagi, Badi H. & Liu, Long, 2008. "Testing for random effects and spatial lag dependence in panel data models," Statistics & Probability Letters, Elsevier, vol. 78(18), pages 3304-3306, December.
    16. Marwa A. Elsherif, 2016. "Exchange Rate Volatility and Central Bank Actions in Egypt: Generalized Autoregressive Conditional Heteroscedasticity Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1209-1216.
    17. Edwards, Sebastian, 1997. "Trade Liberalization Reforms and the World Bank," American Economic Review, American Economic Association, vol. 87(2), pages 43-48, May.
    18. Musila, Jacob W. & Yiheyis, Zelealem, 2015. "The impact of trade openness on growth: The case of Kenya," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 342-354.
    19. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
    20. Jamel Jouini, 2015. "Linkage between international trade and economic growth in GCC countries: Empirical evidence from PMG estimation approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(3), pages 341-372, April.
    21. Abu-Bader, Suleiman & Abu-Qarn, Aamer, 2005. "Financial Development and Economic Growth: Time Series Evidence from Egypt," MPRA Paper 1113, University Library of Munich, Germany.
    22. Antonio N. Bojanic, 2012. "The Impact of Financial Development and Trade on the Economic Growth of Bolivia," Journal of Applied Economics, Taylor & Francis Journals, vol. 15(1), pages 51-70, May.
    23. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    24. Jafari Samimi, Ahmad & Ghaderi, Saman & Hosseinzadeh, Ramezan & Nademi, Younes, 2012. "Openness and inflation: New empirical panel data evidence," Economics Letters, Elsevier, vol. 117(3), pages 573-577.
    25. Han, Jun & Liu, Runjuan & Zhang, Junsen, 2012. "Globalization and wage inequality: Evidence from urban China," Journal of International Economics, Elsevier, vol. 87(2), pages 288-297.
    26. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    27. Nasreen, Samia & Anwar, Sofia, 2014. "Causal relationship between trade openness, economic growth and energy consumption: A panel data analysis of Asian countries," Energy Policy, Elsevier, vol. 69(C), pages 82-91.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Naima Chrid & Sami Saafi & Mohamed Chakroun, 2021. "Export Upgrading and Economic Growth: a Panel Cointegration and Causality Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 811-841, June.
    2. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    3. Carlos A. Carrasco & Edgar Demetrio Tovar-García, 2021. "Trade and growth in developing countries: the role of export composition, import composition and export diversification," Economic Change and Restructuring, Springer, vol. 54(4), pages 919-941, November.
    4. Yongfu Huang, 2011. "Private investment and financial development in a globalized world," Empirical Economics, Springer, vol. 41(1), pages 43-56, August.
    5. Ismail Senturk & Fiaz Ahmad Sulehri & Syeda Mehak Ali, 2022. "Financial Development and Innovation Led-Growth: A Case of Selected Developing Countries," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(3), pages 81-97, September.
    6. Can Li & Qi He & Han Ji, 2023. "Can Global Value Chain Upgrading Promote Regional Economic Growth? Empirical Evidence and Mechanism Analysis Based on City-Level Panel Data in China," Sustainability, MDPI, vol. 15(15), pages 1-22, July.
    7. Markus Eberhardt, 2012. "Estimating panel time-series models with heterogeneous slopes," Stata Journal, StataCorp LP, vol. 12(1), pages 61-71, March.
    8. Zeira, Joseph & di Vaio, Gianfranco & Battisti, Michele, 2013. "Global Divergence in Growth Regressions," CEPR Discussion Papers 9687, C.E.P.R. Discussion Papers.
    9. Fu, Xiaolan & Kaplinsky, Raphael & Zhang, Jing, 2012. "The Impact of China on Low and Middle Income Countries’ Export Prices in Industrial-Country Markets," World Development, Elsevier, vol. 40(8), pages 1483-1496.
    10. Uslu, Çağrı Levent & Aydoğan, Ebru Tomris & Ketenci, Natalya, 2015. "Economic Growth, Financial Development, and Trade Openness in Emerging Markets: Panel Approach," MPRA Paper 64722, University Library of Munich, Germany.
    11. Goya, Daniel, 2020. "The exchange rate and export variety: A cross-country analysis with long panel estimators," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 649-665.
    12. Qamruzzaman, Md & Jianguo, Wei, 2020. "The asymmetric relationship between financial development, trade openness, foreign capital flows, and renewable energy consumption: Fresh evidence from panel NARDL investigation," Renewable Energy, Elsevier, vol. 159(C), pages 827-842.
    13. Vaseem Akram, 2018. "Does export diversification converge? Evidence from cross-country analysis," Economics Bulletin, AccessEcon, vol. 38(4), pages 2141-2151.
    14. Mohamed Chakroun & Naima Chrid & Sami Saafi, 2021. "Does export upgrading really matter to economic growth? Evidence from panel data for high‐, middle‐ and low‐income countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5584-5609, October.
    15. Ciarlone, Alessio, 2011. "Housing wealth effect in emerging economies," Emerging Markets Review, Elsevier, vol. 12(4), pages 399-417.
    16. Urrunaga, Roberto & Aparicio, Carlos, 2012. "Infrastructure and economic growth in Peru," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    17. Olimpia Neagu, 2019. "The Link between Economic Complexity and Carbon Emissions in the European Union Countries: A Model Based on the Environmental Kuznets Curve (EKC) Approach," Sustainability, MDPI, vol. 11(17), pages 1-27, August.
    18. Ben-Salha, Ousama & Dachraoui, Hajer & Sebri, Maamar, 2021. "Natural resource rents and economic growth in the top resource-abundant countries: A PMG estimation," Resources Policy, Elsevier, vol. 74(C).
    19. Sudeshna Ghosh & Buhari Doğan & Muhlis Can & Muhammad Ibrahim Shah & Nicholas Apergis, 2023. "Does economic structure matter for income inequality?," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(3), pages 2507-2527, June.
    20. Dierk Herzer & Sebastian Vollmer, 2012. "Inequality and growth: evidence from panel cointegration," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(4), pages 489-503, December.

    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:rbs:ijbrss:v:11:y:2022:i:7:p:178-188. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Umit Hacioglu (email available below). General contact details of provider: https://edirc.repec.org/data/ssbffea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.