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The asymmetric effect of trade openness on economic growth in South Africa: a nonlinear ARDL approach

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  • Maxwell Chukwudi Udeagha

    (University of Johannesburg)

  • Nicholas Ngepah

    (University of Johannesburg)

Abstract

The untested hypothesis of a linear association between trade openness and economic growth in earlier studies may bring about incorrect inferences if indeed the association is nonlinear. This study uses the newly developed nonlinear autoregressive distributed lags (NARDL) framework to re-examine the link between trade openness and economic growth in South Africa over the period 1960–2016, highlighting the asymmetric effects of trade openness using an innovative proxy of trade openness proposed by Squalli and Wilson (World Econ 34(10):1745–1770, 2011). In contrast to previous studies, the new proxy is constructed to take into consideration both South Africa’s trade share of its GDP and its relative size of trade in relation to world trade in a specified period. Adopting this novel approach to capture openness permits the simultaneous testing of short- and long-run nonlinearities through positive and negative partial sum decompositions of trade openness. It also enables us to quantify the short- and long-run impacts of trade openness increases and decreases on economic growth from asymmetric dynamic multipliers. The results show that trade openness has short- and long-run asymmetric effects on economic growth. These results have important policy implications.

Suggested Citation

  • Maxwell Chukwudi Udeagha & Nicholas Ngepah, 2021. "The asymmetric effect of trade openness on economic growth in South Africa: a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 54(2), pages 491-540, May.
    • Handle: RePEc:kap:ecopln:v:54:y:2021:i:2:d:10.1007_s10644-020-09285-6
    DOI: 10.1007/s10644-020-09285-6
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    References listed on IDEAS

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    Cited by:

    1. Peverga, Kator., 2024. "Trade Openness and Economic Growth in Nigeria: An Autoregressive Distributed Lagged (ARDL) Model Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(4), pages 248-261, April.
    2. Riza Radmehr & Ernest Baba Ali & Samira Shayanmehr & Sayed Saghaian & Elham Darbandi & Ebenezer Agbozo & Samuel Asumadu Sarkodie, 2022. "Assessing the Global Drivers of Sustained Economic Development: The Role of Trade Openness, Financial Development, and FDI," Sustainability, MDPI, vol. 14(21), pages 1-21, October.
    3. Maxwell Chukwudi Udeagha & Marthinus Christoffel Breitenbach, 2024. "Investigating Financial Development and Its Direct and Indirect Environmental Effects in South Africa: Fresh Policy Insights," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(2), pages 428-495, April.
    4. Preethu Rahman & Zhihe Zhang & Mohammad Musa, 2023. "Do technological innovation, foreign investment, trade and human capital have a symmetric effect on economic growth? Novel dynamic ARDL simulation study on Bangladesh," Economic Change and Restructuring, Springer, vol. 56(2), pages 1327-1366, April.
    5. Maxwell Chukwudi Udeagha & Nicholas Ngepah, 2022. "Disaggregating the environmental effects of renewable and non-renewable energy consumption in South Africa: fresh evidence from the novel dynamic ARDL simulations approach," Economic Change and Restructuring, Springer, vol. 55(3), pages 1767-1814, August.
    6. Vu Manh Hoai Nguyen & Tin Huu Ho & Luan Huynh Nguyen & An Thi Ha Pham, 2023. "The Impact of Trade Openness on Economic Stability in Asian Countries," Sustainability, MDPI, vol. 15(15), pages 1-20, July.
    7. Ahakwa, Isaac & Xu, Yi & Tackie, Evelyn Agba, 2023. "Greening human capital towards environmental quality in Ghana: Insight from the novel dynamic ARDL simulation approach," Energy Policy, Elsevier, vol. 176(C).
    8. Valentine Soumtang Bime & Dieudonné Mignamissi & Agathe Cassandra Koumis Ngagni, 2024. "Does financial openness matter for economic transformation in sub-Saharan Africa?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-49, April.
    9. Mohamad Ahmad Abou Hamia, 2024. "The integration of developing countries into world technology markets: cause or effect of total factor productivity?," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(1), pages 879-902, February.
    10. Jayanti Behera & Dukhabandhu Sahoo, 2022. "Asymmetric relationships between information and communication technology (ICT), globalization, and human development in India: evidence from non-linear ARDL analysis," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-25, December.
    11. ATOI, VICTOR NGOZI (PhD), 2023. "Assessing the Drivers of Steady State Economic Growth in Nigeria," MPRA Paper 119386, University Library of Munich, Germany.
    12. Rulia Akhtar & Muhammad Mehedi Masud & Nusrat Jafrin & Sharifah Muhairah Shahabudin, 2023. "Economic growth, gender inequality, openness of trade, and female labour force participation: a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 56(3), pages 1725-1752, June.
    13. Adeel Saleem & Maqbool H. Sial & Ahmed Raza Cheema, 2023. "Does an asymmetric nexus exist between exports and economic growth in Pakistan? Recent evidence from a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 56(1), pages 297-326, February.
    14. Zhang Yu & Muhammad Umer Quddoos & Syed Abdul Rehman Khan & Muhammad Munir Ahmad & Laeeq Razzak Janjua & Muhammad Sajid Amin & Abdul Haseeb, 2023. "Investigating the moderating impact of crime and corruption on the economic growth of Bangladesh: Fresh insights," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 26(2), pages 185-207, June.
    15. Acheampong, Alex O. & Opoku, Eric Evans Osei, 2023. "Environmental degradation and economic growth: Investigating linkages and potential pathways," Energy Economics, Elsevier, vol. 123(C).
    16. Maxwell Chukwudi Udeagha & Nicholas Ngepah, 2022. "Dynamic ARDL Simulations Effects of Fiscal Decentralization, Green Technological Innovation, Trade Openness, and Institutional Quality on Environmental Sustainability: Evidence from South Africa," Sustainability, MDPI, vol. 14(16), pages 1-35, August.

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    More about this item

    Keywords

    International trade; Nonlinear ARDL; Trade openness; Economic growth; Symmetric ARDL; Asymmetry cointegration; South Africa;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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