International Trade and its Impact on Global Economic Development

Abstract

The benefit of international trade had not been noticed in the economic growth of Nigeria because some of the goods imported into the country were those that can cause damage to local industries by rendering their products inferior and being neglected, thereby reducing the growth rate of output of such industries which later spread to the aggregate economy. The work investigated the extent to which international trade impacted global economic development with particular reference to the Nigerian economy between 1986 and 2018. The data employed for this study are annual time series data covering 1986-2018. The data were obtained from the World Bank data outlook and the central bank of Nigeria statistical bulletin. This study adopts the statistical method of multiple linear regression approach using ordinary least squares to examine the relationship between RGDP as a dependent variable and degree of openness, foreign exchange rate, and interest rate as independent variables. The paper revealed that a relationship exists between international trade and economic growth and that while some components of international trade exerted a positive and significant effect on growth, INTR exerted a positive but insignificant effect. The result further shows that all the regressors except interest rates were statistically significant at a 5% level of significance. Some policy recommendations which would be helpful and applicable to the Nigerian economy were suggested. For the degree of openness, Nigeria should adopt more policies on trade liberalization like reducing non-tariff barriers, reducing barriers, and eliminating quotas that will enable the economy to grow at a spectacular rate. The finding for exchange rate implies that the policymakers should adopt long-term policies because, in the long run, a strong currency depends on economic fundamentals. To have a strong exchange rate, countries will need a combination of a low inflation rate, productivity growth, and economic and political stability.