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The causal linkage between trade openness and economic growth in Argentina: Evidence from the ARDL and VECM techniques

Author

Listed:
  • Hlalefang Khobai

    (Department of Economics, Nelson Mandela University)

  • Nomahlubi Mavikela

    (Department of Economics, Nelson Mandela University)

Abstract

The Ricardian-Heckscher-Ohlin trade model drawn from Solow's (1957) model points out that since the country allocates its resources more efficiently after opening up based on its comparative advantages that openness to international trade will bring only a one-time increase in output, therefore having no implications for long-run growth. This led to this study investigating the causal relationship between economic growth and trade openness in Argentina covering the period between 1970 and 2016. Foreign direct investments and capital are incorporated as additional variables to form a multivariate framework. The findings from the ARDL bounds test validated the existence of a long run relationship between economic growth, trade openness, foreign direct investment and capital in Argentina. The results further indicated that there is a long run causality flowing from trade openness, foreign direct investment and capital to economic growth. These results presents a fresh perspective to trade policy makers in Argentina.

Suggested Citation

  • Hlalefang Khobai & Nomahlubi Mavikela, 2017. "The causal linkage between trade openness and economic growth in Argentina: Evidence from the ARDL and VECM techniques," Working Papers 1712, Department of Economics, Nelson Mandela University, revised Oct 2017.
    • Handle: RePEc:mnd:wpaper:1712
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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