THE INTERACTION EFFECT OF TRADE OPENNESS AND INSTITUTIONS ON ECONOMIC GROWTH IN SELECTED COUNTRIES IN AFRICA: A PANEL DATA ANALYSIS

 

MATTHEW, A. Oluwatoyin¹*, ODUNTAN, Emmanuel A.², ADEDIRAN, Oluwasogo S.³

¹Dr., Department of Economics & Development Studies, Covenant University, Ota, NIGERIA, Email: oluwatoyin.matthew@covenantuniversity.edu.ng

^2.Dr. Department of Economics & Development Studies, Covenant University, Ota, NIGERIA, Email: emmanuel.oduntan@covenantuniversity.edu.ng

³Department of Economics & Development Studies, Covenant University, Ota, NIGERIA, Email: oluwasogo.adediran@covenantuniversity.edu.ng

*Corresponding Author

 

Abstract

This study sets out to examine the interaction effect of trade openness and institutions on economic growth in selected African countries using panel data analysis. There is a general discourse that the growth of a country depends on the level of investment which can be achieved most times via engaging in trading activities with other countries of the world. International trade, on the other hand, is enhanced by the presence of strong institutions. It has been observed that the combination of trade openness and institutions affect the economic growth of African countries but which of the institutions when trade is carried on would boost growth more is the aim of this study. This study used secondary data of thirty-five African countries and employed the Least Square Dummy Variables (LSDV) and the Generalized Method of Moments (GMM) econometric techniques for estimation. The major finding of the study revealed that the interaction effect of trade openness, political and cultural institutions is stronger than the interaction effect of trade openness and economic institutions hence economic growth tends to be better in the former case than the latter in the selected African countries. Therefore, the study recommends that attention should be paid to the development of the economic, political and cultural institutions simultaneously by the governments of the African countries.

Keywords: Interaction Effect, Trade Openness, Institutions, Economic Growth, Africa.