Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan

Muhammad Shahbaz

Economic Modelling, 2012, vol. 29, issue 6, 2325-2339

Abstract: The study investigates the impact of trade openness on economic growth in the long run. We apply the ARDL bounds testing approach to test for a long run relationship and the augmented production function by incorporating financial development as an additional determinant of economic growth using the framework of Mankiw et al. (1992). The results confirm cointegration among the series. In the long run, trade openness promotes economic growth. The growth-led-trade hypothesis is vindicated by VECM Granger causality test. The causality is also checked by using the innovative accounting approach (IAA).

Keywords: Trade; Growth; Cointegration; Causality; Pakistan (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (168)

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Working Paper: Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:6:p:2325-2339

DOI: 10.1016/j.econmod.2012.07.015

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