AN AUTOREGRESSIVE DISTRIBUTIVE LAG APPROACH TO COINTERGRATION: AN EXAMINATION OF TRADE OPENESS AND ECONOMIC GROWTH RELATIONSHIPS IN NIGERIA

Bernard o. Muse

Abstract


This paper examines the impact of trade openness on output in case of Nigeria for the period of 1970-2012. In doing so, we applied autoregressive distributive lag (ARDL) bounds testing approach, Error Correction Method (ECM) and CUSUM and CUSUMQ stability tests. The ARDL bounds testing approach to cointegration show no evidence of long run relationship between trade openness and economic growth. However, the study established in the short run, an inverse relationship between the two key variable of interest – trade openness and economic growth, this was further confirm by the results of the CUSUM and CUSUMQ stability tests. The policy implication of this relationship is that economic growth has a deleterious effect on trade in the short run. Thus, policy makers in Nigeria, a developing state, should formulate appropriate policy will enhance trade in the long run, in order achieve higher economic growth.


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