Growth and openness: empirical evidence from Bangladesh

Munshi Haq ()

MPRA Paper from University Library of Munich, Germany

Abstract: The study seeks to investigate empirically the direction and shape of causality among trade openness, investment and economic growth using data for Bangladesh during the period 1980-2006. Although in most cases, statistically reliable evidence of cointegration is sufficient to testify the existence of a long-run relationship among the variables of a particular model, Granger causality test provides a more dependable tool for determining the direction of the causality in particular. In order to achieve the objective of the study, modern econometric methodologies such as unit root tests; cointegration tests; and the Granger causality tests have been applied across all the variables of our model using a trivariate framework of regression equations. The test results indicate that there exists a long-run equilibrium relationship between trade openness, national income growth and total investment. Furthermore, empirical results of Granger causality confirm that there exists unidirectional causality between economic growth and investment; between trade openness and economic growth; and between trade openness and investment. The results, however, support the conventional presumption about the relationships between economic growth and investment; and between trade openness and economic growth while contradicts with that between trade openness and investment.

Keywords: openness; trade liberalisation; GDP; national income; economic growth; investment; trivariate causality tests; unit root test; cointegration; long-run equilibrium relationship; Granger causality (search for similar items in EconPapers)
JEL-codes: F43 (search for similar items in EconPapers)
Date: 2008-09-27
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Citations: View citations in EconPapers (1)

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