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

Joseph Osaro Denwi, Nenubari John Ikue, Joseph Jite Onodjaefe and Mtomabari Simeon
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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

International Journal of Research in Business and Social Science (2147-4478), 2022, vol. 11, issue 7, 178-188

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

Date: 2022
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