The growth effect of trade openness on African countries: evidence from using an Instrumental Variable Panel Smooth Transition Model

Lumengo Bonga-Bonga and Emilie Kinfack

MPRA Paper from University Library of Munich, Germany

Abstract: This paper assesses the relationship between trade openness and economic growth in Africa by accounting for the heterogeneity of African countries. In addition, the paper contributes to the literature of trade openness and economic growth nexus by applying the instrumental variable panel smooth transition regression (IVPSTR), a methodology that accounts for nonlinearity and endogeneity in the relationship between the two variables. The results of the empirical analysis reveal that the level of investment is a channel through which trade openness affects economic growth in the African continent. In addition, the relationship between trade openness and economic growth varies according to the degree of a country’s development in Africa. For low-income countries, the study finds no significant relationship between openness and growth. Conversely, for middle and upper-income countries, the coefficients of trade indicators are positive and statistically significant. The results indicate that African countries are not homogenous, especially with regard to trade openness and economic growth nexus.

Keywords: economic growth; trade openness; non-linearity; instrumental variable panel smooth transition (search for similar items in EconPapers)
JEL-codes: C23 C26 F13 F14 F15 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-afr, nep-dev, nep-gro and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:92111

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