Munich Personal RePEc Archive

Growth and openness: empirical evidence from Bangladesh

Haq, Munshi Masudul (2008): Growth and openness: empirical evidence from Bangladesh.

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Abstract

The study seeks to investigate empirically the direction and shape of causality among trade openness, investment and economic growth using data for Bangladesh during the period 1980-2006. Although in most cases, statistically reliable evidence of cointegration is sufficient to testify the existence of a long-run relationship among the variables of a particular model, Granger causality test provides a more dependable tool for determining the direction of the causality in particular. In order to achieve the objective of the study, modern econometric methodologies such as unit root tests; cointegration tests; and the Granger causality tests have been applied across all the variables of our model using a trivariate framework of regression equations. The test results indicate that there exists a long-run equilibrium relationship between trade openness, national income growth and total investment. Furthermore, empirical results of Granger causality confirm that there exists unidirectional causality between economic growth and investment; between trade openness and economic growth; and between trade openness and investment. The results, however, support the conventional presumption about the relationships between economic growth and investment; and between trade openness and economic growth while contradicts with that between trade openness and investment.

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