TITLE:
The Effects of Trade Openness on Economic Growth in Africa
AUTHORS:
Madinatou Yeh Bunje, Simon Abendin, Yin Wang
KEYWORDS:
Trade Openness, Pooled Ordinary Least Square, Fixed and Random Effects, System GMM, Africa
JOURNAL NAME:
Open Journal of Business and Management,
Vol.10 No.2,
March
3,
2022
ABSTRACT: This study aimed to enhance how trade openness is measured by including
facets of nations’ global trade integration to generate four distinct measures:
exports plus imports to GDP ratio, the ratio of exports to GDP, the ratio of
imports to GDP, and their combined effect index. We use the pooled ordinary
least square, fixed effects, and the system generalized methods of moment’s
estimation approaches to analyze balanced panel data from 52 African nations
from 2000 to 2018. The results show an intriguing mixed pattern between trade
openness and GDP per capita: 1) POLS show trade openness has a mixed influence
on economic growth. Similarly, when subdividing Africa into sub-regions, trade
openness demonstrated a non-linear relationship with GDP, but the result in Northern Africa is sturdy in terms of economic growth. 2) Trade openness has a negative and statistical effect on GDP per
capita, as per the fixed-effects model. 3) Finally, the sys-GMM verifies that
trade openness is not resilient across various openness measures and robustness
regression estimates. In particular, the findings suggest that imports stifle
growth while exports boost growth in Africa. In this context, we advocate that
governments pursue the new structural
economic policies to encourage export expansion and promote economic
growth.