An investigation into the relationship between trade openness and economic growth: A study of selected economies in the Sub-Saharan region (1990 – 2013)

Abstract

The debate of trade openness and economic growth has been studied by many researchers and various conclusions have been made. This study attempted to add a voice to the debate by coming up with proxy measures for trade openness. Average tariffs, tariff revenues, imports volumes, foreign direct investment and total trade volumes were variables used to explain economic growth. The study employed the Random Effects Model ahead of the pooled ordinary least squares and Fixed Effects Model owing to the results of the Poolability test, Breusch-Pagan test as well as the Hausman test. Average tariffs, tariff revenues, foreign direct investment and total trade volumes were found to be significant in explaining economic growth and therefore the thrust (as suggested in the policy recommendations) was to liberalise trade in line with the mentioned variables. The study found that trade liberalisation spurs economic growth although it is just one piece of the puzzle of government policies that requires other pieces (policies) to complete the maze.