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Causality Testing between Trade Openness, Foreign Direct Investment and Economic Growth: Fresh Evidence from Sub-Saharan African Countries

Author

Listed:
  • . OLABISI, Olabode E

    (Department of Economics, Elizade University, Ilara-Mokin Ondo State, Nigeria)

  • LAU, Evan

    (Faculty of Economics and Business, Universiti Malaysia Sarawak (UNIMAS), Malaysia)

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. Test di causalità tra apertura commerciale, investimenti diretti esteri e crescita economica: evidenze aggiornate dai paesi dell’Africa sub-sahariana La letteratura esistente sull’argomento non ha ancora realizzato un consenso unanime circa la direzione della causalità tra l’apertura commerciale, gli investimenti diretti esteri e la crescita economica, in particolare tramite un’analisi panel dei dati dei paesi dell’Africa sub-sahariana. Questo articolo adotta metodi econometrici di prima e seconda generazione per analizzare questa relazione nei paesi dell’Africa sub-sahariana tra il 1980 e il 2016 come la cointegrazione di Westerlund, il gruppo medio ad effetto comune correlato (CGEMG) e la causalità Bootstrap Granger. Le evidenze mostrano che vi è una dipendenza trasversale tra i 23 paesi dell’Africa sub-sahariana considerati. Esiste anche una cointegrazione di lungo periodo tra apertura commerciale, investimenti diretti esteri e crescita economica. Vi è una relazione significativa positiva tra l’apertura commerciale e la crescita. Gli investimenti diretti esteri indicano una relazione positiva significativa con la crescita. I risultati del panel error correction term (ECT) hanno ulteriormente confermato la relazione di lungo periodo tra le variabili.

Suggested Citation

  • . OLABISI, Olabode E & LAU, Evan, 2018. "Causality Testing between Trade Openness, Foreign Direct Investment and Economic Growth: Fresh Evidence from Sub-Saharan African Countries," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(4), pages 437-464.
    • Handle: RePEc:ris:ecoint:0835
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    More about this item

    Keywords

    FDI; Real GDP per capita; Pooled Mean Group; Trade Openness;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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