International Conference on Eurasian Economies
5-7 October 2017 – Bishkek, KYRGYZSTAN
Paper detail
Paper ID : 2013
Status : Paper published
Language : English
Topic : International Trade and Globalization
Presenter: Asst. Prof. Dr. Fahri Kurşunel
Session : 2A Growth & Development
Relationship Between Trade Openness, Capital Formation and Economic Growth: A Panel Data Analysis for African Countries
Relationship Between Trade Openness, Capital Formation and Economic Growth: A Panel Data Analysis for African Countries
- Prof. Dr. Ahmet Ay (Selçuk University, Türkiye)
- Asst. Prof. Dr. Fahri Kurşunel (Selçuk University, Türkiye)
- Ph.D. candidate Mahamane Moutari Abdou Baoua (Selçuk University, Türkiye)
Abstract
The more a country is open to trade, the more it attracts investors and the faster its economy develops. However, some study showed that sometime it can be the opposite of all this. In this context, the main purpose of this study is to investigate the relationship between trade openness, capital formation and economic growth in African countries. To do so, we collected data of GDP per capita, trade (% of GDP), Gross national expenditure and capital formation variables. The method applied is panel cointegration and causality by using time series of 38 African countries for the period of 1990-2014. According to the results there is long run relationship between all the variables and the cross sectional co-integration test result indicates that there is more cointegration in Comoros, Equatorial Guinea, Niger and Guinea-Bissau. With highest GDP per capita, Equatorial Guinea has more long-run relationship between trade openness, capital formation and economic growth. However, one of the poorest countries in the world (Niger), has also efficient long run relationship between the variables. The panel causality test results suggest that there is unidirectional causal relationship from trade openness to economic growth. There is also bidirectional causality link between capital formation and economic growth. In the same context, causal link exists from capital formation to trade openness. The study suggests that African countries must increase the investment promotions in order to increase the capital formation and trade openness then to boost economic growth.
JEL codes:
Ay, Ahmet, Kurşunel, Fahri, Abdou Baoua, Mahamane Moutari (2017). "Relationship Between Trade Openness, Capital Formation and Economic Growth: A Panel Data Analysis for African Countries" in Proceedings of International Conference of Eurasian Economies 2017, pp.43-50, Bishkek, KYRGYZSTAN.
DOI: https://doi.org/10.36880/C09.02013
Session 2A: Growth & Development
