5.1.5 RESULT FOR GRANGER CAUSALITY TEST Table 3:
Pairwise Granger Causality Tests
Date: 12/31/16 Time: 03:14
Sample: 1980 2014
Lags: 9 Null Hypothesis: Obs F-Statistic Probabiliy EXPORTS does not Granger Cause RGDP 26 11.0158 0.00228
RGDP does not Granger Cause EXPORTS 1.96909 0.19193 EMPL does not Granger Cause RGDP 26 9.44839 0.00365 RGDP does not Granger Cause EMPL 5.54812 0.01712 IMPORTS does not Granger Cause RGDP 26 0.95566 0.53661 RGDP does not Granger Cause IMPORTS 0.72990 0.67732
GDI does not Granger Cause RGDP 26 0.55345 0.79919 RGDP does not Granger Cause GDI 0.57093 0.78707
INFRAT does not Granger Cause RGDP 26 2.95875 0.08333 RGDP does not Granger Cause INFRAT 1.02953 0.49626
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At first we couldn’t rejected the null hypothesis because result from table 1 shows that only two variables were stationary at level while four variables became stationary at first difference and the result gives us the strong proof of unit root in the variables. Therefore all variables were tested at first difference and the ADF test make known that all the variables became stationary at first difference, therefore, the null hypothesis at first difference of unit root were rejected so we concluded by saying that the variables became stationary after first difference. Which means that the variables are co-integrated of order one I(1), and this give us the chance to performed co-integration analysis. From the result, we realized that international trade in Liberia more than decades has produced a very little significant impact on economic growth. As a result, the viewpoint of the economy as of (1980-2014) is not much hopeful in spite of the constant trade flow into Liberia though, the country economy still undergoes so many problems, in this light, all variables using as proxies to international trade, only imports (IMP) was positive and significant while other remained significant but negative. This indicates major problems in the economy of Liberia and also confirmed why the nation economy has recorded a trade deficit
International Trade helps boost development and also reduces poverty by generating growth through increased commercial opportunities and investment, as well as broadening the productive base through private sector development. it also enhances competitiveness by helping developing countries reduce the cost of inputs, acquire finance through investments, increase the value added of their products and move up the global value chain.
Foreign demand for a primary product may also limit economic growth as demand for a particular commodity will cause an increase in demand for a country’s currency, thus resulting in the appreciation of the currency. This would reduce the competitiveness of the country’s manufactured exports, thus leading to a decrease in the financial resources gained from exports which could have enabled the country to raise the level of economic welfare to encourage development.
Some of the countries with surplus commodities may dumb them on international markets at a low price. Under such conditions, some of the efficient industries can might find difficulties in competing for long period. Furthermore, countries whose economies are mostly rural will face unfavourable terms of trade. For example, ration of export prices to import prices. Which means that their export income is more smaller than their import payments the make for high value added imports, as it leads to subsequently large foreign debt levels.
Trade policy in developing countries obtained major influence from the changing views in economic development, namely, inward looking and outward looking (Moon, 1998). For about 3 decades after World War II (WWII), the trade policy of developing countries relies on inward-looking development. This type of development is implemented through autarky trade policies to protect country’s local manufacture industry. There are so many critics delivered during the inward looking development implementation. Then, around eighties, most of developing countries started to change its trade policies in to more outward-looking policy. Those two policies conflicts each other’s. One emphasizes the importance of the principle of comparative advantage, campaigning free market and export oriented policies, while the other highlights to foster domestic market through Import Substitution Industrialisation (ISI).
As part of these theories appears arises that relationship between trade openness and economic growth is positive. These theories between trade openness and economic growth can be located more than 200 years, with the mercantilist theories. Under these concepts, International trade benefited a nation
First of all, variables should be given in log levels in order to alleviate the problem of serial correlation and the elasticity of the coefficients. The results of ADF unit root test in levels concludes that all three variables - seasonally
Within the wider national context, the analysis of the trade deficit has multiple applications. For instance, it allows policy makers to assess the size of imports and exports and to develop and implement policies that support national interests. Within the increasingly globalized market place, the countries are
This report discusses international trade for the country of Rodamia. The report talks about advantages and limitations of trade, and also comparative and absolute advantage. The report also discusses influences that affect foreign exchange rates.
In the 1970’s and 1980’s trade openness and economics reform towards market mechanism flourished in many developing countries. This trend is much different as compared to those in the early 1950’s and 1960’s when many less developed countries favored protection policy, inward orientation, and import substitution. As a result of this change, there are substantial developments in world economy after applying outward orientation. According to Thilrwall (2011 p. 514), the implementation of trade openness has managed world output trade relative to world output gain a considerable growth in the period of 1960-2006. The volume of world trade has risen 25 times or nearly 8 percent per annum (at annual compound rate). In the meantime
This paper discus the various problems that the developing countries face in international trade and their effect on the agricultural, industrial and service sectors. Some of these problems are external while
In last few decades there has been growth in integration for the world of economy through the development in international trade. The growth and development of has increased continuously to the same as world output since 1960 to 2010. Some of this growth can be calculated for the truth that this goods have become cheaper as compare to previous rates over time relative to those goods that are imported or exported in various country. However, the nominal terms of the trade to GDP (United currency) ratio has shown growth in last few decades. This means other factors are helping to contribute and develop to the phenomenon. The trade to outcome is evident since the Second World War and seems to be growing for
Since 1992, Mozambique has been with higher level of imports taking the country to trade deficit. The increase in imports is fuelled by increase consumption of goods and services, and in 2013 expanded to 84.007 %. The increase of imports takes the trade and current account to deficit.
Belize is a private sector led small economy that is highly dependent on external trade and vulnerable to internal and external shocks arising from its macroeconomic and trade policies . Belize trade profile shows that about 61.6 percent of its exports are on agricultural products while imports and exports to Gross Domestic Product (GDP) ratios are 72.4 and
Chenery and Strout (1994) asserted that for a long time, there was hardly any country which exhibited sustained growth rate higher than its growth of exports. They also claim that growth rates of individual developing countries since 1950 correlate better with their export performance than with any other single economic indicator. Thirlwall (1997) in his work, explained the possibility that export growth may set up a vicious cycle of growth such that once a country is launched on the path, it maintains its competitive position in world trade and performs continually better relative to other countries. He also contended that export growth relieves a country of balance of payments constraints so that the faster exports grow, the faster output growth can be without running into balance of payments difficulties. His findings suggest that an export based strategy of development offers the best prospects for economic growth. Although theoretical links between trade and economic growth have been extensively discussed for over two centuries, a lot of controversies still abound concerning their real effects. The arguments in favour of trade can be traced to the classical school of economic thought that started with Adam Smith (Medina–Smith, 2001). Since then, the justification for free trade
This paper sought to evaluate the concept of Trade Liberalization and Development in Nigeria especially from 1999 to 2010. It was discovered that Trade liberalization theory is a branch of international trade as popularized by Adam Smith, which promotes free trade between states. It stipulates that free trade will lead to an increase the wealth on nations. The purpose of the paper is to investigate the role of trade liberalization in the economic development of Nigeria. The study was carried out using the world systems theory, which believes that there is a world economic system in which some countries benefit while others are exploited. Secondary sources of data were used in the study. Our findings however reveal that trade liberalization quite contrary to what its proponents have postulated has not resulted to any economic growth in Nigeria. From the data we have presented it has been shown that Nigerian economy was doing relatively well in the 1960s, but started declining when she started opening up her economy to the outside world buying all manners of goods from the