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Trade Openness, Financial Development and Economic Growth in Lesotho: BVAR and Time-varying VAR Analysis

Author

Listed:
  • Kazeem Abimbola Sanusi

    (North-West University, South Africa)

  • Zandri Dickason-Koekemoer

    (North-West University, South Africa)

Abstract

This research paper explores the dynamic relationship between trade openness, financial development, and economic growth in Lesotho. The study utilizes quarterly time series data spanning from 1970 to 2021, obtained from the Central Bank of Lesotho. This paper makes a significant contribution to the methodological discourse by utilizing a time-varying VAR approach, in addition to the Bayesian VAR estimation approach. The empirical results indicate that there is no cointegration relationship between economic growth, financial development, and trade openness. However, the evidence shows a unidirectional causality from economic growth to trade openness in Lesotho. The Bayesian VAR and time-varying VAR estimations reveal that the variables dynamically react and adjust to shocks among the variables. The study recommends that to stimulate the opening up of the economy to the world, growth-enhancing policies such as the provision of world-class infrastructure facilities, improved healthcare facilities, and a conducive macroeconomic environment should be implemented, considering the insufficient international demand in Lesotho.

Suggested Citation

  • Kazeem Abimbola Sanusi & Zandri Dickason-Koekemoer, 2024. "Trade Openness, Financial Development and Economic Growth in Lesotho: BVAR and Time-varying VAR Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 14(3), pages 66-75, May.
    • Handle: RePEc:eco:journ1:2024-03-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade Openness; Financial Development; Economic Growth;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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