Causality Testing between Trade Openness, Foreign Direct Investment and Economic Growth: Fresh Evidence from Sub-Saharan African Countries

Olabode E . Olabisi and Evan Lau
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Olabode E . Olabisi: Department of Economics, Elizade University, Ilara-Mokin Ondo State, Nigeria

Economia Internazionale / International Economics, 2018, vol. 71, issue 4, 437-464

Abstract: Previous works are yet to reach a consensus about the direction of causality between Trade Openness (TO), Foreign Direct Investment (FDI) and Economic Growth (EG), in particular, using a panel data analysis for Sub-Saharan African (SSA) countries. This study adopts first and second generation econometric methods to analyse the relationships between trade openness, FDI and economic growth in Sub-Saharan Africa countries over the period 1980-2016. The Westerlund cointegration, the Common Correlated Effect Mean Group (CCEMG), and the Bootstrapp Granger causality econometric techniques were adopted. Findings show there is a cross-sectional dependence among the 23 SSA countries examined. A long-run cointegration among trade openness, FDI and economic growth also exists. A positive and significant relationship exists between trade openness and economic growth. FDI indicates a positive and significant relationship with economic growth. The panel error correction term (ECT) result further confirmed the long-run relationship among the variables. A bidirectional causal relationship exists among trade openness, foreign direct investment net inflows and economic growth for Gambia, Senegal and South African countries. Test di causalità tra apertura commerciale, investimenti diretti esteri e crescita economica: evidenze aggiornate dai paesi dell’Africa sub-sahariana La letteratura esistente sull’argomento non ha ancora realizzato un consenso unanime circa la direzione della causalità tra l’apertura commerciale, gli investimenti diretti esteri e la crescita economica, in particolare tramite un’analisi panel dei dati dei paesi dell’Africa sub-sahariana. Questo articolo adotta metodi econometrici di prima e seconda generazione per analizzare questa relazione nei paesi dell’Africa sub-sahariana tra il 1980 e il 2016 come la cointegrazione di Westerlund, il gruppo medio ad effetto comune correlato (CGEMG) e la causalità Bootstrap Granger. Le evidenze mostrano che vi è una dipendenza trasversale tra i 23 paesi dell’Africa sub-sahariana considerati. Esiste anche una cointegrazione di lungo periodo tra apertura commerciale, investimenti diretti esteri e crescita economica. Vi è una relazione significativa positiva tra l’apertura commerciale e la crescita. Gli investimenti diretti esteri indicano una relazione positiva significativa con la crescita. I risultati del panel error correction term (ECT) hanno ulteriormente confermato la relazione di lungo periodo tra le variabili.

Keywords: FDI; Real GDP per capita; Pooled Mean Group; Trade Openness (search for similar items in EconPapers)
JEL-codes: F14 F43 O49 O55 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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