HOW FAR AND WIDE? A COINTEGRATION APPROACH TO TRADE OPENNESS
HOW FAR AND WIDE? A COINTEGRATION ANALYSIS OF TRADE OPENESS AND ECONOMIC GROWTH IN NIGERIA (1980-2011)
OGUNRINOLA, Ifeoluwa Israel (CUGP120397)
Department of Economics and Development Studies, Covenant University, Ota, Nigeria.
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ABSTRACT
The study examines the relationship between trade openness and economic growth in Nigeria but focuses on how wide in terms of volume the nation should be towards foreign trade. The study employs the ADF test for unit root to investigate the presence or otherwise of unit root in the model. The variables were found to be I(1). The OLS estimation technique was also employed to establish linear relationship between variables in the regression model while a co-integration analysis was carried out to determine if there exists a long run relationship between variables of interest in the study. The study confirmed statistical significance of most variables in the model while a long run co-integration relationship was found of the variables involved. The period under study is from 1980-2011. The study concludes by agreeing that for the Nigerian economy to experience long run growth, it should focus on a fairly restricted policy oriented, open/receptive economy for international trade.
Keywords: Trade Openness, Economic growth, Nigeria, Cointegration.
1. INTRODUCTION
In the world economy since 1950 there has been a massive liberalization of world trade, first under the auspices of the General Agreement on Tariffs and Trade (GATT), established in 1947 and now under the auspices of the World Trade Organization (WTO) which replaced the GATT in 1993. According to Thirwall (2000), tariff levels in highly developed nations have skimmed down dramatically, and now average approximately 4 percent. Tariff levels in developing nations of the world have also been reduced, although they still remain relatively high, averaging 20 percent in the low-and middle-income
OGUNRINOLA, Ifeoluwa Israel (CUGP120397)
Department of Economics and Development Studies, Covenant University, Ota, Nigeria.
______________________________________________________________________________
ABSTRACT
The study examines the relationship between trade openness and economic growth in Nigeria but focuses on how wide in terms of volume the nation should be towards foreign trade. The study employs the ADF test for unit root to investigate the presence or otherwise of unit root in the model. The variables were found to be I(1). The OLS estimation technique was also employed to establish linear relationship between variables in the regression model while a co-integration analysis was carried out to determine if there exists a long run relationship between variables of interest in the study. The study confirmed statistical significance of most variables in the model while a long run co-integration relationship was found of the variables involved. The period under study is from 1980-2011. The study concludes by agreeing that for the Nigerian economy to experience long run growth, it should focus on a fairly restricted policy oriented, open/receptive economy for international trade.
Keywords: Trade Openness, Economic growth, Nigeria, Cointegration.
1. INTRODUCTION
In the world economy since 1950 there has been a massive liberalization of world trade, first under the auspices of the General Agreement on Tariffs and Trade (GATT), established in 1947 and now under the auspices of the World Trade Organization (WTO) which replaced the GATT in 1993. According to Thirwall (2000), tariff levels in highly developed nations have skimmed down dramatically, and now average approximately 4 percent. Tariff levels in developing nations of the world have also been reduced, although they still remain relatively high, averaging 20 percent in the low-and middle-income
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