Impact of Trade Openness on Economic Growth: Empirical Evidence from South Africa

Malefa Rose Malefane and Nicholas Odhiambo
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Malefa Rose Malefane: Department of Economics, University of South Africa, UNISA, Pretoria, South Africa

Economia Internazionale / International Economics, 2018, vol. 71, issue 4, 387-416

Abstract: This paper examines the impact of trade openness on economic growth in South Africa. The study employs the autoregressive distributed lag (ARDL) bounds testing approach to investigate the dynamic impact of trade openness on economic growth. Unlike some previous studies, the current study uses four proxies of trade openness, with each proxy addressing a different aspect of trade openness. The first proxy of trade openness is derived from the ratio of trade to gross domestic product (GDP). The second proxy is the ratio of exports to GDP, while the third proxy is the ratio of imports to GDP. The last proxy is an index of trade openness, which captures the effects of residual openness, resulting from taking the country’s size and geography into account. Based on the long run empirical results, this study finds that trade openness has a positive and significant impact on economic growth when the ratio of total trade to GDP is used as a proxy, but not when the three other proxies are employed. However, in the short-run, when the first three proxies of openness are used, the study finds trade openness to have a positive impact on economic growth, but not so when the trade openness index is employed. These results, therefore, suggest that the promotion of policies that support international trade is relevant in the South African economy. L’impatto dell’apertura commerciale sulla crescita: evidenze empiriche dal Sud Africa Questa ricerca esamina l’impatto dell’apertura commerciale sulla crescita in Sud Africa utilizzando il test ARDL (Autoregressive Distributed Lag). A differenza di studi precedenti, il presente lavoro utilizza quattro indici di apertura commerciale, ciascuno dei quali ne rappresenta un aspetto diverso. Il primo si ottiene dal rapporto commercio/PIL. Il secondo è rappresentato dal rapporto esportazioni/PIL, il terzo dal rapporto importazioni/PIL. L’ultimo è un indice di apertura commerciale che esprime gli effetti dell’apertura residuale ottenuta considerando la dimensione e le caratteristiche geografiche del paese. Sulla base di risultati empirici di lungo periodo questo studio rileva che l’apertura commerciale ha un effetto positivo significativo sulla crescita quando si utilizza l’indice ottenuto dal rapporto commercio totale/PIL, mentre tale effetto non emerge quando sono utilizzati gli altri tre indici. I risultati dello studio evidenziano che, nel breve periodo, se si utilizzano i primi tre indici risulta un impatto positivo sulla crescita, mentre ciò non si verifica quando viene impiegato il quarto indice.

Keywords: ARDL; Economic Growth; Exports; Imports; South Africa; Trade Openness (search for similar items in EconPapers)
JEL-codes: C13 F43 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Working Paper: Impact of trade openness on economic growth: Empirical evidence from South Africa (2018)
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