Reconsidering Trade and Investment-led Growth Hypothesis: New Evidence from Nigerian Economy
The need to revisit the trade and investment-led growth hypothesis in the case of Nigerian economy has become pertinent following the recent record drop of 15% in FDI inflows to West Africa. This fall in FDI flow to the region has been primarily attributed to the abysmal performance of Nigeria in attracting FDI as the largest economy in the sub-region despite an average rise in the rate of FDI flow to Africa as a continent at large. In this study, the trade and foreign direct investment-led growth hypothesis were revisited in the case of Nigerian economy. Our empirical findings provide evidence to support the trade-led growth hypothesis as trade measures were found to be significantly and positively impacting real economic growth in the reviewed period. In particular, the export-led growth hypothesis was upheld by the results. On the other hand, we have found mixed evidence on the investment-led growth hypothesis as only domestic investments demonstrated a significant positive impact on economic growth while FDI was not significant for economic growth in the country for the period under review. Thus, to harness the inherent benefits of inward FDI in the wake of dynamic trade relations, efficacious policy directions were provided with respect to the findings. (original abstract)
- Aizenman, J., & Noy, I. (2006). FDI and trade-Two-way linkages?. The Quarterly Review of Economics and Finance, 46(3), 317-337. https://doi.org/10.1016/j.qref.2006.02.004
- Akinlo, E. (2003). Globalization, international investment and stock market growth in Sub Saharan Africa: final research report submitted to the Institute of Developing Economies, JETRO, Japan.
- Alesina, A., & Perotti, R. (1997). The Welfare State and Competitiveness. The American Economic Review, 921-939. doi:10.3386/w4810
- Asiedu, E. (2002). On the determinants of foreign direct investment to developing countries: is Africa different?. World Development, 30(1), 107-119. https://doi.org/10.1016/S0305-750X(01)00100-0
- Asongu, S. A., Folarin, E. O., & Biekpe, N., (2019). The Stability of Demand for Money in the Proposed Southern African Monetary Union. International Journal of Emerging Markets. DOI: 10.1108/IJOEM-08-2018-0443.
- Bölük, G., & Mert, M. (2015). The renewable energy, growth and environmental Kuznets curve in Turkey: An ARDL approach. Renewable and Sustainable Energy Reviews, 52, 587-595. https://doi.org/10.1016/j.rser.2015.07.138
- Box, G. E., Jenkins, G. M., Reinsel, G. C., & Ljung, G. M. (2015). Time series analysis: forecasting and control. John Wiley & Sons.
- David, R. (1817). On the principles of political economy and taxation. publicado en.
- Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica: Journal of the Econometric Society, 1057-1072. doi: 10.2307/1912517
- Dix-Carneiro, R., & Kovak, B. K. (2017). Trade liberalization and regional dynamics. American Economic Review, 107(10), 2908-46. doi: 10.1257/aer.20161214
- Ekpo, A. H. (1995). Openness and economic performance in Nigeria: A time series approach. In Selected Paper for the 1995 Annual Conference The Nigerian Economic Society.
- Enders, W. (1995). Applied econometric time series, 1sd New York, Ed. John Willey & Sons, Inc, 251-276.
- Estevadeordal, A., & Taylor, A. M. (2013). Is the Washington consensus dead? Growth, openness, and the great liberalization, 1970s-2000s. Review of Economics and Statistics, 95(5), 1669-1690. https://doi.org/10.1162/REST_a_00358
- Greenaway, D., Morgan, W., & Wright, P. (2002). Trade liberalization and growth in developing countries. Journal of development economics, 67(1), 229-244. https://doi.org/10.1016/S0304-3878(01)00185-7
- Haseeb, M., Abidin, I. S. Z., Hye, Q. M. A., & Hartani, N. H. (2018). The impact of renewable energy on economic well-being of Malaysia: Fresh evidence from autoregressive distributed lag bound testing approach. International Journal of Energy Economics and Policy, 9(1), 269-275. doi: https://doi.org/10.32479/ijeep.7229
- Hutchison, T. (1976). Adam Smith and the wealth of nations. The Journal of Law and Economics, 19(3), 507-528. https://doi.org/10.1086/466885
- Kee, H. L., Neagu, C., & Nicita, A. (2013). Is protectionism on the rise? Assessing national trade policies during the crisis of 2008. Review of Economics and Statistics, 95(1), 342-346. https://doi.org/10.1162/REST_a_00241
- Krugman, P. R. (1987). Is free trade passé?. Journal of Economic Perspectives, 1(2), 131-144. doi: 10.1257/jep.1.2.131
- Melitz, M. J., & Trefler, D. (2012). Gains from trade when firms matter. Journal of Economic Perspectives, 26(2), 91-118. doi:10.1257/jep.26.2.91
- Nwaka, I. D., & Onifade, S. T. (2015). Government Size, Openness, and Income Risk Nexus: New Evidence from Some African Countries (No. WP/15/056). AGDI Working Paper. Available at: https://econpapers.repec.org/RePEc:abh:wpaper:15/056
- Oladipo, O. S. (1998). Trade Liberalisation and Economic Growth. Ife Social Science Review, 15(1), 80.
- Olatunji, L. A., & Shahid, M. S. (2015). FDI and Economic Growth in Nigeria: A Co-integration Analysis. Business and Economic Research, 5(1), 243-261. https://doi.org/10.5296/ber.v5i1.6647
- Olokoyo, F. O. (2012). Foreign direct investment and economic growth: A case of Nigeria. Journal of Management Research, 4(1), 1-20. http://eprints.covenantuniversity.edu.ng/id/eprint/8989
- Olomola, P. A. (1998). Openness and long-run economic growth in Nigeria (1960-98). Journal of Economic Management, 5(1), 39-62.
- Olufemi, S. M. (2004). Trade openness and economic growth in Nigeria: Further evidence on the causality issue. South African Journal of Economic and Management Sciences, 7(2), 299-315. https://hdl.handle.net/10520/EJC31437
- Onifade, S. T., Ay, A., Asongu, S., & Bekun, F. V. (2020a). Revisiting the trade and unemployment nexus: Empirical evidence from the Nigerian economy. Journal of Public Affairs, e2053. doi.org/10.1002/pa.2053
- Onifade, S. T., Çevik, S., Erdoğan, S., Asongu, S., & Bekun, F. V. (2020b). An empirical retrospect of the impacts of government expenditures on economic growth: new evidence from the Nigerian economy. Journal of Economic Structures, 9(1), 6. https://doi.org/10.1186/s40008-020-0186-7
- Pesaran, M. H., & Shin, Y. (1998). An autoregressive distributed lag modeling approach to cointegration analysis. Econometric Society Monographs, 31, 371-413.
- Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
- Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346. https://doi.org/10.1093/biomet/75.2.335
- Prebisch, R. (1950). The economic development of Latin America and it principal problems. Economic Bulletin for Latin America, 7(1), 385-421.
- Rodrik, D. (2018). What do trade agreements really do?. Journal of economic perspectives, 32(2), 73-90. doi:10.1257/jep.32.2.73
- Rodrik, D. (1997). Trade strategy, investment, and exports: another look at East Asia. Pacific Economic Review, 2(1), 1- 24. https://doi.org/10.1111/1468-0106.t01-1-00020
- Shrestha, M. B., & Bhatta, G. R. (2018). Selecting appropriate methodological framework for time series data analysis. The Journal of Finance and Data Science, 4(2), 71-89. https://doi.org/10.1016/j.jfds.2017.11.001
- Smith, A. (1950). An Inquiry into the Nature and Causes of the Wealth of Nations, (1776).
- Sulaymonov, A. (2017). Privileges of Free Trade, Factors, and Arguments towards Protectionism. International Journal of Economics and Management Science, 6, 426. doi: 10.4172/2162-6359.1000426.
- Taiwo, S., Alagöz, M., & Erdoğan, S. (2020). Inflation, oil revenue, and monetary policy mix in an oil-dependent economy: empirical insights from the case of Nigeria. International Journal of Business, 7(2), 96-109. doi: 10.18488/journal.62.2020.72.96.109
- United Nations Conference on Trade and Development, UNCTAD. (2019). World Investment Report. Geneva: United Nations. Available at https://unctad.org
- World Development Indicator, WDI (2018). World Bank, Washington D. C. available at https://databank.worldbank.org/reports.aspx?source=world-development-indicators.
- World Trade Organization, WTO. (2018). World Trade Statistical Review. Available at http://www.wto.org/wtsr18
- World Investment Report (06 June 2018) UNCTAD/PRESS/PR/2018/018 Geneva, Switzerland. Available at: https://unctad.org/en/PublicationsLibrary/wir2018_en.pdf
- Zahonogo, P. (2016). Trade and economic growth in developing countries: Evidence from sub-Saharan Africa. Journal of African Trade, 3(1-2), 41-56. https://doi.org/10.1016/j.joat.2017.02.001