Economic openness, institutional quality and per capita income: Evidence from the Economic Community of West African States (ECOWAS)
Keywords:FDI inflows, openness of the economy, regulatory quality, institutional quality
The controversy surrounding the actual impact of institutional quality and economic openness on economic growth is among the motivating factors for this study. The study seeks to investi- gate this relationship in the Economic Community of West African States (ECOWAS) by using the panel autoregressive distributed lag (ARDL) test with annual series covering the period from 2000 to 2020. Findings indicate that in the short-run, regulatory quality and FDI outflows had an adverse impact on the economic performance of the ECOWAS bloc. Furthermore, the long-run results show that trade openness, political stability and FDI outflows had an adverse impact on the economy of the bloc, while regulatory quality positively affected the economy. Consequently, the paper recommends that member countries in the ECOWAS bloc should put in place effective regulatory framework in the short and medium term to attract FDI inflows, while building a strong and stable political environment in the long term.
Abere, S. S., & Akinbobola, T. O. (2020). External shocks, institutional quali- ty, and macroeconomic performance in Nigeria. SAGE Open, 1–18 https://doi.org/10.1177/2158244020919518 DOI: https://doi.org/10.1177/2158244020919518
Abubakar, S. (2020). Institutional quality and economic growth: Evidence from Nigeria. African Journal of Economic Review, 8(1), 48–64. https://www.ajol.info/index.php/ajer/article/view/192194
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2015). Democracy, redistribu- tion, and Inequality. Handbook of Income Distribution, 2, 1885–1966. https://doi.org/10.1016/B978-0-444-59429-7.00022-4 DOI: https://doi.org/10.1016/B978-0-444-59429-7.00022-4
Aron, J. (2000). Growth and institutions: A review of the evidence. The World Bank Research Observer, 15(1), 99–135. https://doi.org/10.1093/wbro/15.1.99 DOI: https://doi.org/10.1093/wbro/15.1.99
Brun, J., & Gnangnon, S. K. (2017). Does trade openness contribute to driving financing flows for development? World Trade Organization Working Paper, ERSD-2017-06. https://www.wto.org/english/res_e/reser_e/ersd201706_e.pdf
Das, R. U., & Rishi, M. (2010). Are trade openness and financial development complemen- tary? Research and Information System for Developing Countries Discussion Paper, No. 165. https://ideas.repec.org/p/eab/tradew/22790.html DOI: https://doi.org/10.2139/ssrn.2431656
Diakosavvas, D., & Scandizzo, P. L. (1991). Trends in the terms of trade of primary commodi- ties, 1900–1982: The controversy and its origin. Economic Development and Cultural Change, 39(2), 231–264. https://ideas.repec.org/a/ucp/ecdecc/v39y1991i2p231-64.html DOI: https://doi.org/10.1086/451869
Ehigiamusoe, K. U., & Hooi Hooi, L. (2018). Tripartite analysis of financial development, trade openness and economic growth: Evidence from Ghana, Nigeria and South Africa. Contemporary Economics, 12(2), 189–206. https://doi.org/10.5709/ce.1897-9254.271
Fatima, S., Chen, B., Ramzan, M., & Abbas, Q. (2020). The nexus between trade openness and GDP growth: Analyzing the role of human capital accumulation. SAGE Open, 10(4), 1–18. https://doi.org/10.1177/2158244020967377 DOI: https://doi.org/10.1177/2158244020967377
Goh, X., Tong, W., & Tang, T. (2019). Financial openness and trade openness nexus: Empirical evidence from global data. Capital Markets Review, 27(1), 1–18. https://www.mfa.com.my/wp-content/uploads/2019/09/cmr2019_271_pp1-18.pdf
Grossman, G. M., & Helpman, E. (1991). Quality ladders in the theory of growth. The Review of Economic Studies, 58, 43–61. https://doi.org/10.2307/2298044 DOI: https://doi.org/10.2307/2298044
Ha, L. T. N. (2016). Relationship of growth and transparency in the public sector. VNU Journal of Science: Economics and Business, 32(4), 12–20 (In Vietnamese). https://js.vnu.edu.vn/EAB/article/view/3876
Huchet, M., Mouël, C. L., & Vijil, M. (2018). The relationship between trade openness and economic growth: Some new insights on the openness measurement issue. The World Economy, 41(1), 59–76. https://doi.org/10.1111/twec.12586 DOI: https://doi.org/10.1111/twec.12586
Krugman, P. (1994). The myth of Asia’s miracle. Foreign Affairs, 73(6), 62–78. https://doi.org/10.2307/20046929 DOI: https://doi.org/10.2307/20046929
Le, T,. Kim, J., & Lee, M. (2015). Institutional quality, trade openness, and financial develop- ment in Asia: An empirical investigation. Asian Development Bank Economics Working Paper Series, No. 452. https://www.adb.org/sites/default/files/publication/173761/ewp-452_0.pdf DOI: https://doi.org/10.2139/ssrn.2707547
Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. https://doi.org/10.1016/0304-3932(88)90168-7 DOI: https://doi.org/10.1016/0304-3932(88)90168-7
Mputu, C. L. (2016). Terms of trade openness and economic growth in sub-Saharan Africa. An M.Sc. thesis submitted to the Department of Economics, St. Cloud State University.
Ngo, M. N., & Nguyen, L. D. (2020). Economic growth, total factor productivity, and insti- tution quality in low-middle income countries in Asia. The Journal of Asian Finance, Economics, and Business, 7(7), 251–260. https://doi.org/10.13106/jafeb.2020.vol7.no7.251 DOI: https://doi.org/10.13106/jafeb.2020.vol7.no7.251
Nguyen, C. P., Su, T. D., & Nguyen, T. V. H. (2018). Institutional quality and economic growth: The case of emerging economies. Theoretical Economics Letters, 8, 1943–1956. DOI: https://doi.org/10.4236/tel.2018.811127
North, D. C. (1990). Institutions, institutional change, and economic performance. Cambridge University Press. https://doi.org/10.1017/CBO9780511808678 DOI: https://doi.org/10.1017/CBO9780511808678
Nzeh, L, C,. Uzoechina, I. B., Eze, M. A., Imoagwu, P. C., & Anyachebelu, U. M. (2021). Does the abundance of natural resources crowd-out the manufacturing sector?. Evidence from Nigeria. Asian Development Policy Review, 9(3), 108–126. https://doi.org/10.18488/journal.107.2021.93.108.126 DOI: https://doi.org/10.18488/journal.107.2021.93.108.126
Oanh, K. T., Hac, D. L., & Anh, H. V. (2021). Role of institutional quality in economic devel- opment: A case study of Asian countries. Problems and Perspectives in Management, 19(2), 357–369. http://dx.doi.org/10.21511/ppm.19(2).2021.29 DOI: https://doi.org/10.21511/ppm.19(2).2021.29
Obiakor, R. T., Okwu, A. T & Akpa, E. O. (2021). Terms of trade, trade openness and gov- ernment spending in Nigeria. Nigerian Defense Academy Journal of Economics and Finance, 5(2), 55–62. https://ssrn.com/abstract=3979700
Olanrewaju, G. O., Tella, S. A., & Adesoye, B. A, (2019). Institutional quality, financial in- clusion and inclusive growth: Causality evidence from Nigeria. Central Bank of Nigeria Economic and Financial Review, 7(3), 40–60. https://tinyurl.com/cmcm62f4
Prebisch, R (1950). The economic development of Latin America and its principal problems. Economic Bulletin for Latin America, 7, 1–22. https://repositorio.cepal.org/bitstream/handle/11362/30088/S4900192_en.pdf
Quazi M. A., Shahida, W., & Wee-Yeap, L. (2016). The impact of trade openness on eco- nomic growth in China: An empirical analysis. Journal of Asian Finance, Economics and Business, 3(3), 27–37. https://doi.org/10.13106/jafeb.2016.vol3.no3.27 DOI: https://doi.org/10.13106/jafeb.2016.vol3.no3.27.
Rajan, R. G., & Zingales, L. (2003). The great reversals: the politics of financial develop- ment in the twentieth century. Journal of Financial Economics, 69, 5–50. https://doi.org/10.1016/S0304-405X(03)00125-9 DOI: https://doi.org/10.1016/S0304-405X(03)00125-9
Rathnayaka Mudiyanselage M. M. , Epuran G., & Tescașiu, B. (2021). Causal Links between trade openness and foreign direct investment in Romania. Journal of Risk and Financial Management, 14(3), 1–18. https://doi.org/10.3390/jrfm14030090 DOI: https://doi.org/10.3390/jrfm14030090
Recuero, L. H., & González, R. P. (2019). Economic growth, institutional quality and fi- nancial development in middle-income countries. Documentos de Trabajo, No 1937. Banco De Espana. https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/ PublicacionesSeriadas/DocumentosTrabajo/19/Fich/dt1937e.pdf
Rodrik, D. (1999). Where did all the growth go? External shocks, social conflict, and growth collapses. Journal of Economic Growth, 4, 385–412. https://www.jstor.org/stable/40216016 DOI: https://doi.org/10.3386/w6350
Saifullahi, S., & Nuruddeen, T. (2015). The linkages between trade openness, financial open- ness and economic growth in Nigeria. MPRA Paper, No. 87494. https://mpra.ub.uni-muenchen.de/87494/
Singer, H. (1950), The distribution of gains between investing and borrowing countries. American Economic Review, Papers and Proceedings, 40, 473–485.
Wang, M. L., Ntim, V. S., Yang, J., Zheng, Q., & Geng, L. (2021). Effect on institutional qual- ity and foreign direct investment on economic growth and environmental quality: Evidence from African countries. Economic Research—Ekonomska Istrazivanja, 35(1), 4065–4091. https://doi.org/10.1080/1331677X.2021.2010112 DOI: https://doi.org/10.1080/1331677X.2021.2010112
Wei, H. (2015). Does financial openness affect economic growth in Asian economies? A case study in selected Asian economies, 1980–2010. Graduate Center, City University of New York. https://academicworks.cuny.edu/gc_etds/638
Wiredu, J., Nketiah, E., & Adjei, M. (2020). The relationship between trade openness, foreign direct investment and economic growth in West Africa: Static Panel Data Model. Journal of Human Resource and Sustainability Studies, 8, 18–34. https://doi.org/10.4236/jhrss.2020.81002 DOI: https://doi.org/10.4236/jhrss.2020.81002
- 2023-02-20 (2)
- 2023-02-17 (1)
How to Cite
Copyright (c) 2022 Innocent Chile Nzeh, Hycenth Oguejiofoalu Richard Ogwuru, David Ogomegbunam Okolie, Jonathan Ibekwe Okolie
This work is licensed under a Creative Commons Attribution 4.0 International License.
The Research Papers in Economics and Finance (REF) is committed to open access. All of the REF` s paper are free to access immediately from the date of publication. There are no author charges, known as APCs, before release, and no charge for any reader to download articles.
The Creative Commons Attribution 4.0 International license (CC BY 4.0) applies to articles published in Research Papers in Economics and Finance from Vol. 4, No. 3, 2020 to present. This license is acceptable for Free Cultural Works. You are free to share and adapt. You must give appropriate credit, provide a link to the license, and indicate if changes were made.
The Attribution-NonCommercial 4.0 International license (CC BY-NC 4.0) applies to articles published in Research Papers in Economics and Finance up to Vol. 4, No. 2, 2020 inclusive. You are free to share and adapt. You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may not use the material for commercial purposes.