Nexus between Openness to Trade and Economic Growth: An Empirical Investigation of Afghanistan

2019 ◽  
Vol 20 (2) ◽  
pp. 205-223
Author(s):  
Nassir Ul Haq Wani
Keyword(s):  
Economic Growth ◽  
Trade Openness ◽  
Decomposition Analysis ◽  
Developed Countries ◽  
Least Square ◽  
Capital Goods ◽  
Promotion Strategy ◽  
Distributed Lag ◽  
Long Run ◽  
Volume Of Trade

The notion that the international trade is the foundation of economic growth dates long back, and even now, an irresistible body of literature confirms a strong and positive link between trade openness and economic growth. However, most of these studies are focused on developed countries. Indeed literature from developing countries are scant, those from under developed and a landlocked country like Afghanistan are almost non-existent. This article endeavours to innovatively scrutinize the relationship between trade liberalization and economic growth in Afghanistan, using biannual data for the period 1995–2016 and thus evaluates the comparative effect of three different measures of trade openness on the economic growth by using more rigorous econometric techniques. Autoregressive distributed lag (ARDL) method, JJ CO-integration and ordinary least square (OLS) results suggest significant positive long-run relationship between export and economic growth. In contrast, total volume of trade and imports have significant negative effect on the economic growth. The addition of variables and results of fully modified OLS suggest that the results are robust. The Granger causality and variance decomposition analysis indicate the unidirectional causality between trade openness and economic growth. In export model, causality runs from export to growth. Whereas, in the model with total volume of trade and import, causality runs from growth to total volume of trade and imports in Afghanistan. From the findings, it is concluded that the policymakers should focus on export promotion strategy to enhance the economic growth in Afghanistan. Besides, efficient utilization of capital goods should be ensured and reliance on non-capital goods should be less in order to ensure high domestic production in the country. JEL: F10, F43, C22

scholarly journals Impact of Digital Payments on Economic Growth: Evidence from India

2019 ◽  
Vol 8 (12) ◽  
pp. 553-557 ◽  
Keyword(s):  
Economic Growth ◽  
Financial Stability ◽  
Developed Countries ◽  
Least Square ◽  
Distributed Lag ◽  
Long Run ◽  
Study Results ◽  
Digital Transactions ◽  
Digital Payments ◽  
The Impact

In recent years, economic transactions are carried out through electronic or online or cashless means all over the world especially in developed countries and developing countries like India. As a result of increased digital means of payment has brought down usage of cash transactions in the economy. Digital transactions have the features of speed, less cost, and comfort. A well functioning digital payment system has much relevance on overall economic activity, monetary policy, and financial stability of a country. This study tries to verify the impact of digital payments on the economic growth of India. The economic growth is measured through a proxy – real Gross Domestic Product. Digital payments are measured using Real Time Gross Settlement (RTGS), Clearing Corporation of India Ltd (CCIL) operated systems, paper clearing, retail electronic clearing, Card payments, and Prepaid Payment Instruments (PPIs). Data for digital payments and real GDP are collected from the year 2011 to 2019. Ordinary Least Square Regression, Auto-Regressive Distributed Lag (ADRL) co-integration approach and ARDL Bounds test are employed for the analysis. The study results reveal that digital payments impact economic growth significantly in the short run. But, digital payments don’t impact economic growth in the long-run.

scholarly journals Consequences of Capital formation, Trade Liberalization on the Economic Growth: Pakistan’s Experience

2015 ◽  
Vol 2 (1) ◽  
pp. 1-4
Author(s):  
Nadia Bukhari ◽  
Anjum Iqbal
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Trade Openness ◽  
Capital Formation ◽  
Vital Role ◽  
Series Data ◽  
Distributed Lag ◽  
Long Run ◽  
Auto Regressive ◽  
Adf Test

This study considers the long run relationship between the liberalization of trade, capital formation and the economic growth of Pakistan by using the time series data from 1975-2013. The main aim of this study is to examine that how much liberalization of trade and capital formation affects the economic growth of Pakistan in long run. The approach that has been used for empirical analysis is Auto Regressive Distributed Lag (ARDL) model. Under the ADF test capital formation (CF) is stationary at its first level but the trade openness (TO) and GDP is stationary at its first difference. Moreover, the granger casualty test is evident that there become a casual relationship between the trade openness and GDP. The result of this study shows that both the trade openness and the capital formation determined the economic growth in long run and they both have statistically significant effect on the GDP. Furthermore it has has been depicted from the study that the trade has a vital role to influence the economic growth.

scholarly journals The Impact of Industrialization, Trade Openness, Financial Development, and Energy Consumption on Economic Growth in Indonesia

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 174
Author(s):  
Khalid Eltayeb Elfaki ◽  
Rossanto Dwi Handoyo ◽  
Kabiru Hannafi Ibrahim
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Least Squares ◽  
Financial Development ◽  
Correction Term ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

This study aimed to scrutinize the impact of financial development, energy consumption, industrialization, and trade openness on economic growth in Indonesia over the period 1984–2018. To do so, the study employed the autoregressive distributed lag (ARDL) model to estimate the long-run and short-run nexus among the variables. Furthermore, fully modified ordinary least squares (FMOLS), dynamic least squares (DOLS), and canonical cointegrating regression (CCR) were used for a more robust examination of the empirical findings. The result of cointegration confirms the presence of cointegration among the variables. Findings from the ARDL indicate that industrialization, energy consumption, and financial development (measured by domestic credit) positively influence economic growth in the long run. However, financial development (measured by money supply) and trade openness demonstrate a negative effect on economic growth. The positive nexus among industrialization, financial development, energy consumption, and economic growth explains that these variables were stimulating growth in Indonesia. The error correction term indicates a 68% annual adjustment from any deviation in the previous period’s long-run equilibrium economic growth. These findings provide a strong testimony that industrialization and financial development are key to sustained long-run economic growth in Indonesia.

scholarly journals Impact of Domestic Public Debt on Economic Growth - An Empirical Study in the Indian Context

2016 ◽  
Vol 6 (4) ◽  
pp. 101-116
Author(s):  
Srinivasa Rao Gangadharan ◽  
Lakshmi Padmakumari
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Positive Impact ◽  
Least Square ◽  
Distributed Lag ◽  
Long Run ◽  
Domestic Debt ◽  
Integration Test ◽  
Ordinary Least Square Regression ◽  
The Impact

This study is an empirical investigation to assess the impact of domestic debt on India’s Economic growth during the period 1980 – 2014. We use data on Domestic Debt, Net Fiscal Deficit, Exports, Savings, Real Gross Domestic Product, Population and Terms of Trade. This study adopts the ARDL Co-Integration and Granger Causality techniques to investigate the relation between the key variables. The study also employs various post estimation tests to validate the fitness and stability of the models based on Gauss Markov assumptions, after employing the ordinary least square regression on various models. We find that debt negatively impacts economic growth while savings has a positive impact. The Auto Regressive Distributed Lag (ARDL) technique used to test the robustness suggests existence of co-integration among the variables. However, none of the long run co-efficient is significant. The granger causality and co-integration test results support the traditional view that debt negatively impacts economic growth.

Panel Data Analysis of Financial Development, Trade Openness, and Economic Growth: Evidence from BRICS Countries

2018 ◽  
Vol 4 (1) ◽  
pp. 1-18 ◽  
Author(s):  
Ritu Rani ◽  
Naresh Kumar
Keyword(s):  
Economic Growth ◽  
Trade Openness ◽  
Panel Cointegration ◽  
Least Square ◽  
Cointegration Test ◽  
Ordinary Least Square ◽  
Brics Countries ◽  
Long Run ◽  
Panel Granger Causality ◽  
Panel Cointegration Test

The purpose of this article is to investigate the possible cointegration and direction of causality between foreign direct investment (FDI) inflow, trade openness, and economic growth in BRICS countries using panel data from 1993 to 2015. Besides these variables, money supply and domestic credit (DC) to private players are also added in the model to examine the impact of financial openness on economic growth. The Pedroni’s panel cointegration test is used to examine the existence of long-run relationship, and coefficients of cointegration are examined by fully modified ordinary least square (FMOLS) and dynamic ordinary least square (DOLS). Further panel Granger causality test is used to examine the direction of causality among the competing variables. The results of Pedroni’s panel cointegration test indicate that there exists a long-run relationship among the variables under considerations in BRICS countries. The coefficient of FMOLS and DOLS indicates that trade openness has a positive impact on economic growth in BRICS countries while FDI inflow has a negative impact in these nations. In addition, the results of panel Granger causality confirmed bidirectional causality between FDI inflow and economic growth in the short run. The study recommends that BRICS countries should liberalize trade openness as it strengthens the position of member countries in the world economy.

scholarly journals Impact of Trade Openness and Human Capital on Economic Growth: A Comparative Investigation of Asian Countries

2020 ◽  
Vol 12 (7) ◽  
pp. 2930 ◽  
Author(s):  
Rabail Amna Intisar ◽  
Muhammad Rizwan Yaseen ◽  
Rakhshanda Kousar ◽  
Muhammad Usman ◽  
Muhammad Sohail Amjad Makhdum
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Negative Impact ◽  
Trade Openness ◽  
Least Square ◽  
Ordinary Least Square ◽  
Southern Asia ◽  
Long Run ◽  
Western Asia ◽  
The Impact

The aim of this study is to analyze the impact of trade openness and human capital on economic growth in 19 Asian countries from 1985 to 2017. We selected two geographically distributed regions (Western and Southern Asia) based on difference in their GDP per capita. We applied the unit root tests to examine the level of stationarity and found that all variables were integrated at first difference. Kao and Fisher cointegration tests were employed and the results revealed the presence of a long-run relationship. We applied fully modified ordinary least square (FMOLS) and dynamic ordinary least square (DOLS) models to check the magnitude of the long-run coefficients among trade openness, human capital and economic growth. To investigate the direction of causality, we used a Dumitrescu and Hurlin (DH) causality test. The results indicated that trade openness and human capital have a significant and positive relationship while labor force participation has a negative effect on economic growth in Southern Asia, and in the case of Western Asia, the impact is positive. Foreign direct investment (FDI) has a negative and significant impact on GDP per capita (GDPPC) in Western Asia while it is positive and significant in Southern Asia; Total population (TPOP) has a negative impact on GDPPC in both regions. Furthermore, human capital has a positive and significant impact on trade openness in both panels. Meanwhile, labor force participation (LFP) has a positive and significant impact on trade openness in Southern Asia and a negative impact in the case of Western Asia. Trade openness and economic growth have bidirectional causality in Western Asia and unidirectional causality in Southern Asia. It also shows that human capital and economic growth have unidirectional causality in both regions.

scholarly journals An empirical nexus between poverty and unemployment on economic growth

2021 ◽  
Vol 9 (1) ◽  
pp. 85-94
Author(s):  
KEJI Sunday Anderu
Keyword(s):  
Economic Growth ◽  
Agricultural Sector ◽  
Poverty Rate ◽  
Least Square ◽  
Small Scale ◽  
Distributed Lag ◽  
Long Run ◽  
Lm Test ◽  
Short Run ◽  
The Government

The study examines the empirical nexus between poverty and unemployment on economic growth in Nigeria between 1980 and 2016. Auto-Regressive Distributed Lag (ARDL), Bound cointegration testing, and Error Correction Methods (ECM) were used to investigate the link between unemployment, poverty rate, and economic growth in Nigeria. Post estimation tests such as the Jarque-Bera test, Breusch-Pagan, ARCH test, and Ramsey reset test were also adopted in order to validate the research finding. The diagnostic tests further disclosed that the estimated model follows the Ordinary Least Square technique assumptions to attain efficiency and consistency of the model employed. The Jarque-Bera test suggests that residuals for both models are normally distributed, and the Breusch-Godfrey Serial Correlation (LM) test indicates that the hypothesis of no autocorrelation cannot be rejected. Interestingly, the ARDL and ECM results show that unemployment and poverty significantly impact economic growth both in the short and long run. Hence, the study recommended that the Nigeria government should ensure that adequate measures are put in place: Such as investment in education, agricultural sector reform, expansionary fiscal policy, intervention in micro-lending for small scale businesses by the government should be implemented to reduce the level of unemployment and poverty rate both in the short run and long run.

Exploring Dynamic Linkages Between Inward FDI and India’s Economic Growth

2019 ◽  
Vol 8 (2) ◽  
pp. 109-117
Author(s):  
Rakesh Shahani ◽  
Aayushi
Keyword(s):  
Economic Growth ◽  
Serial Correlation ◽  
Trade Openness ◽  
Capita Gross Domestic Product ◽  
Model Stability ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Net Flows ◽  
Yearly Data

The present study attempts to develop a co-integrating relationship between foreign direct investment (FDI) net inflows into India and its economic growth for the calendar period 1986–2016 by taking log-transformed yearly data. The variables included in the study were per capita gross domestic product (GDP; as a measure of economic growth) and FDI net flows. Additional regressors as control variables include exports as a percentage of GDP (a proxy for trade openness) and call money rate (a proxy for financial variable). The methodology employed is autoregressive distributed lag (ARDL) bounds partial F-test. The results of the study show a positive co-integrating relation between FDI and GDP as given by computed F-value after controlling for other factors impacting growth. The long-run model also satisfied the necessary prerequisites of the model, such as variable stationarity, no serial correlation, and model stability. The lagged error correcting mechanism (ECM) was negative, stable, and significant; however, pace of adjustment was found to be at a slow rate of 7.6 percent per period (per annum).

Trade openness, financial liberalization and economic growth

2017 ◽  
Vol 6 (3) ◽  
pp. 229-246 ◽  
Author(s):  
Rana Muhammad Adeel-Farooq ◽  
Nor Aznin Abu Bakar ◽  
Jimoh Olajide Raji
Keyword(s):  
Economic Growth ◽  
Financial Liberalization ◽  
Positive Impact ◽  
Trade Openness ◽  
Principal Component ◽  
Content Type ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Comparison Of The Results

Purpose The purpose of this paper is to empirically examine the effects of financial liberalization and trade openness on the economic growth of two countries, namely, Pakistan and India for the period 1985-2014. Design/methodology/approach This study uses the autoregressive distributed lag technique, which allows mixed order of integration. In addition, it uses the principal component method to create an index for financial liberalization to examine how it affects the economic growth of the selected countries. Findings The findings reveal that in the short and long run, trade openness has positive effect on the Pakistan’s economic growth while the financial liberalization has positive impact only in the long run. In the case of India, both financial liberalization and trade openness positively and significantly influence the economic growth in the short and long run. Practical implications By comparing the results of both countries, trade openness and financial liberalization increase the economic growth of India more than that of Pakistan. These results suggest that Pakistan should consider appropriate positive policies regarding financial liberalization and trade openness to achieve high and stable economic growth in the future. Originality/value This study creates financial liberalization index by using the principal component analysis method to explain the role of financial liberalization in the economic growth of Pakistan and India. In addition, it makes comparison of the results based on which country benefits most from the liberalization of trade and financial sectors. Only very few studies have examined these countries, yet their results have remained inconclusive as well.

scholarly journals Trade Openness and Economic Growth in Nepal

2020 ◽  
Vol 3 (1) ◽  
pp. 1-20
Author(s):  
Surya Bahadur Rana
Keyword(s):  
Economic Growth ◽  
Foreign Trade ◽  
Human Resource Development ◽  
Trade Openness ◽  
Developed Countries ◽  
Bounds Testing ◽  
Advanced Country ◽  
Long Run ◽  
Study Results ◽  
The Impact

This study examines the impact of trade openness on economic growth in Nepal over the period 1975-2019. Using ARDL bounds testing approach to co integration in the multivariate framework, the study results reveal that there exists a long-run relationship between Nepal’s foreign trade and economic growth over the study period. The long-run estimates of ARDL models how that the level of trade openness in Nepal predicts the rate of economic growth of the country positively and significantly in the long-run. The study also reports the positive and significant long run effect of investment level on growth in Nepal over the study period supporting the trade induced investment growth hypothesis. It postulates that trade openness affects economic growth through the channel of investment. The growth enhancing role of trade openness implies that Nepal Government should promote international trade by eliminating trade barriers and making the procedures of foreign trade simple and convenient. Besides, Nepal’s import policy should promote investment environment particularly in capital intensive sectors to take the advantage of technology transfer from technologically advanced country. Furthermore, Nepal should pay proper attention and come up with effective human resource development policy that can uplift human knowledge and skills to make use of technologies from developed countries.

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