Effects of Trade Openness on Economic Growth in Africa
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Date
2021-06
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Addis Ababa University
Abstract
Countries around the world are liberalizing their trade policies because trade openness is considered as one of the primary tools to increase economic growth. The paper empirically analyzes the effect of trade openness on the economic growth in Africa countries over the period 1996 to 2019. The empirical result shows that negative association between trade openness and economic growth in African countries, however; finding of the study approved a significant positive relationship between trade liberalization and economic growth of Africa countries is contingent on Initial Income per capita and other explanatory variables. Moreover, the study result also established that the impact of trade openness is more significant and beneficial to countries with higher level of initial per capita income, as well as, countries with higher Human capita and FDI. The paper recommends that efforts are required to ensure stable macroeconomic environment which will encourage other stakeholders to play their part in the growth process. Africa Countries should invest both in physical and human capital for the growing labour force. This could be done using domestic sources as well as encouraging foreign direct investment.
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Economic growth, trade openness, Africa countries, dynamic panel, system GMM