Financial Openness, Trade Openness, and Economic Growth Nexus: A Dynamic Panel Analysis for Emerging and Developing Economies

Thembalethu Macdonald Seti (), Sukoluhle Mazwane and Mzuyanda Christian
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Thembalethu Macdonald Seti: The Department of Agriculture, Cape Peninsula University of Technology, Wellington 7654, South Africa
Sukoluhle Mazwane: School of Agricultural Sciences, Mbombela Campus, University of Mpumalanga, Mbombela 1200, South Africa
Mzuyanda Christian: School of Agricultural Sciences, Mbombela Campus, University of Mpumalanga, Mbombela 1200, South Africa

JRFM, 2025, vol. 18, issue 2, 1-15

Abstract: International market openness has long been regarded as critical for economic development, and recent evidence highlights the distinct roles of financial and trade openness, particularly in emerging and developing economies. This study examines the impact of financial and trade openness on economic growth in ten emerging and developing countries from 1970 to 2023. It employs a dynamic panel generalized method of moments (GMM) model, which is selected for its ability to address potential endogeneity and dynamic relationships within panel data. The analysis finds that both financial and trade openness positively influence economic growth and that stable macroeconomic conditions and political stability enhance these growth-promoting effects. In the context of growing geo-economic tensions, trade fairness, and national security concerns, the study underscores the need for policies that balance global integration with national interests. These findings suggest the importance of designing policies that promote greater integration into global financial and trading systems while ensuring sound macroeconomic fundamentals and supportive institutions. The study recommends that policymakers pursue strategic liberalization and strengthen governance structures to achieve sustained and inclusive growth.

Keywords: financial openness; trade openness; economic growth; generalized method of moments (GMM) model; panel data analysis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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