Abstract
This study examines the long-run and short-run relationship between industrial production and trade openness in Nigeria during the period from 1986 to 2008 by using quarterly data. It employs the ARDL bounds testing methodology developed by M. Hashem Pesaran, Yongcheol Shin, and Richard J. Smith (2001). The results of both the long-run analysis and the short-run error correction model (ECM) indicate that trade openness has a significant and positive impact on industrial production. The Toda-Yamamoto causality analysis shows that there is one-way Granger causality, running from trade openness to industrial production.
Highlights
We reviewed more studies that use the methodology we employed in this study, Autoregressive Distributive Lag (ARDL) approach, which is not used by many researchers who study the Nigerian case
We examined whether a long-run relationship exists in Nigeria between industrial production, openness to trade, nominal effective exchange rate, and the inflation rate
We found that openness to trade has a significant relationship with industrial production in the period that followed the inception of the Structural Adjustment Programme (SAP) in 1986 both in the long-run and the short-run
Summary
The empirical literature on the relationship between openness to trade and industrial growth in both developed and developing countries is large. Qazi Muhammad Adnan Hye (2012) finds that openness to trade and economic growth are negatively related in the case of Pakistan This result was obtained by using several econometric methods including the Johansen and ARDL bounds testing approaches to co-integration, and with data from 1971 to 2009. By using similar methods and annual data from 1971 to 2009, Hye and Wee-Yeap Lau (2015) find a positive relationship between trade openness and economic growth in India in the short run, but a negative one in the long run. Effiong (2013) find that there is a relationship between trade openness and manufacturing output both in the short-run and the long-run in Nigeria They used annual data for the period from 1970 to 2008, and employed ARDL bound testing approach to obtain the results. Granger causality tests indicate that there is only causality from economic growth to openness, not the other way around
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