Trade openness, poverty, and sustainable development: Testing for causality using Dumitrescu-Hurlin approach
DOI:
https://doi.org/10.20414/jed.v6i2.8572Keywords:
trade openness, poverty, sustainable development, ECOWAS, Dumitrescu-Hurlin (DH) approachAbstract
Purpose — This research paper explores the causal links between trade openness, poverty, and sustainable development, shedding light on the potential impact of trade policies on poverty reduction and sustainable development in the Economic Community of West African States (ECOWAS) region.
Method — We utilize the Dumitrescu-Hurlin (DH) panel causality test, a robust econometric approach capable of discerning the direction and magnitude of causal relationships among variables. We employ a comprehensive dataset spanning from 1986 to 2020, covering ECOWAS countries, to conduct a rigorous empirical analysis.
Result — The empirical findings from the DH causality analysis reveal a unidirectional relationship between trade openness, human capital investment, and both sustainable development and poverty. Additionally, bidirectional causality relationships are observed between human capital investment and poverty. The results also highlight the absence of a consistent and uniform pattern of Granger causality between poverty and sustainability across individual West African economies. This heterogeneity underscores the need for customized policy approaches based on empirical evidence derived from country-specific causality analyses, rather than adopting one-size-fits-all solutions.
Novelty — This research stands out by exploring the causal connections among trade openness, poverty, and sustainable development within the Economic Community of West African States (ECOWAS) region. The adoption of the Dumitrescu-Hurlin (DH) panel causality test enhances the empirical analysis, offering a comprehensive understanding of both the direction and magnitude of these relationships.
Downloads
References
Abel, A. B., & Eberly, J. C. (2016). A Unified Model of Investment Under Uncertainty. American Economic Review.
Al-Mulali, U., Saboori, B., & Ozturk, I. (2015). Investigating the environmental Kuznets curve hypothesis in Vietnam. Energy Policy, 76, 123–131. https://doi.org/10.1016/J.ENPOL.2014.11.019
Bekhet, H. A., Matar, A., & Yasmin, T. (2017). CO2 emissions, energy consumption, economic growth, and financial development in GCC countries: Dynamic simultaneous equation models. Renewable and Sustainable Energy Reviews, 70, 117–132. https://doi.org/10.1016/J.RSER.2016.11.089
Cairns, R. D., & Martinet, V. (2014). An environmental-economic measure of sustainable development. European Economic Review. https://doi.org/10.1016/j.euroecorev.2014.03.001
Chang, R., Kaltani, L., & Loayza, N. V. (2009). Openness can be good for growth: The role of policy complementarities. Journal of Development Economics, 90(1), 33–49. https://doi.org/10.1016/J.JDEVECO.2008.06.011
Dithmer, J., & Abdulai, A. (2017). Does trade openness contribute to food security? A dynamic panel analysis. Food Policy. https://doi.org/10.1016/j.foodpol.2017.04.008
Dumitrescu, E. I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450–1460. https://doi.org/10.1016/j.econmod.2012.02.014
Ferreira, S., & Vincent, J. R. (2005). Genuine savings: Leading indicator of sustainable development? Economic Development and Cultural Change. https://doi.org/10.1086/426834
Feyrer, J. (2019). Trade and income-exploiting time series in geography. American Economic Journal: Applied Economics, 11(4), 1–35. https://doi.org/10.1257/app.20170616
Frankel, J. A., & Rose, A. K. (2005). Is Trade Good or Bad for the Environment? Sorting out the Causality. In Source: The Review of Economics and Statistics (Vol. 87, Issue 1).
Harrison, A., & Rodríguez-Clare, A. (2010). Trade, Foreign Investment, and Industrial Policy for Developing Countries*. Handbook of Development Economics, 5(C), 4039–4214. https://doi.org/10.1016/B978-0-444-52944-2.00001-X
Hodge, D. (2006). Inflation and growth in South Africa. Cambridge Journal of Economics. https://doi.org/10.1093/cje/bei051
Holz, C. A. (2006). New capital estimates for China. China Economic Review. https://doi.org/10.1016/j.chieco.2006.02.004
Maku, O. E., Ogede, J. S., Adelowokan, O. A., & Oshinowo, B. O. (2021). Exploring the interaction of trade openness, income inequality, and poverty in Nigeria. Journal of Enterprise and Development, 3(2), 113–130. https://doi.org/10.20414/jed.v3i2.3966
Manderson, E., & Kneller, R. (2012). Environmental Regulations, Outward FDI and Heterogeneous Firms: Are Countries Used as Pollution Havens? Environmental and Resource Economics, 51(3), 317–352. https://doi.org/10.1007/s10640-011-9500-z
Mankiw, N. G., Romer, D., & Weil, D. N. (n.d.). A CONTRIBUTION TO THE EMPIRICS OF ECONOMIC GROWTH*.
McMillan, M., Rodrik, D., & Verduzco-Gallo, Í. (2014). Globalization, Structural Change, and Productivity Growth, with an Update on Africa. World Development, 63, 11–32. https://doi.org/10.1016/j.worlddev.2013.10.012
Muhammad Abubakar, H., Tariq, M., Commer Soc Sci Pakistan Journal, P. J., Muhammad Abubakar Siddique, H., & Tariq Majeed, M. (2015). Munich Personal RePEc Archive Energy consumption, economic growth, trade, and financial development nexus in south asia Energy Consumption, Economic Growth, Trade and Financial Development Nexus in South Asia. In Commerce and Social Sciences (Vol. 9, Issue 2).
Ogede, J. S. (2014). OPENNESS AND ECONOMIC PERFORMANCE IN SUB-SAHARAN AFRICAN COUNTRIES: EVIDENCE FROM TIME-SERIES AND CROSS-SECTIONAL ANALYSES. Ago-Iwoye Journal of Social and Behavioural Sciences, 3(2).
Omri, A., & Kahouli, B. (2014). Causal relationships between energy consumption, foreign direct investment, and economic growth: Fresh evidence from dynamic simultaneous-equations models. Energy Policy, 67, 913–922. https://doi.org/10.1016/J.ENPOL.2013.11.067
Shahbaz, M., Nasreen, S., Abbas, F., & Anis, O. (2015). Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries? Energy Economics, 51, 275–287. https://doi.org/10.1016/J.ENECO.2015.06.014
Ogede, J. S., & Tiamiyu, H. O. (2022). Gauging the Impact of Openness on Sustainable Development in Nigeria: Evidence from FM-OLS and ARDL Approaches to Cointegration. 7(1), 33–40. https://doi.org/10.22135/sje.2021.7.1
van der Eng, P. (2009). Capital formation and capital stock in Indonesia, 1950-2008. Bulletin of Indonesian Economic Studies, 45(3), 345–371. https://doi.org/10.1080/00074910903301662
Wang, X., Yan, H., Libin, E., Huang, X., Wen, H., & Chen, Y. (2022). The Impact of Foreign Trade and Urbanization on Poverty Reduction: Empirical Evidence from China. Sustainability (Switzerland), 14(3). https://doi.org/10.3390/su14031464
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Adewale Musliudeen Balogun, Oluwaseyi Adedayo Adelowokan, Felix Odunayo Ajayi, Jimoh Sina Ogede
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
