Trade Openness Research Articles

Sovereign ESG and Foreign Direct Investment in the GCC: The Amplifying Role of Trade Openness in Economic Diversification

This study examines the relationship between Sovereign Environmental, Social, and Governance (SESG) initiatives and foreign direct investment (FDI) within the context of the Gulf Cooperation Council (GCC) countries from 2000 to 2022. The research explores how national ESG performance influences the attractiveness of these countries to foreign investors, with a particular focus on the moderating role of trade openness. Using a comprehensive panel data analysis, the study finds that strong SESG frameworks are positively correlated with higher FDI inflows, with trade openness amplifying the positive impact of SESG. Additionally, the use of Instrumental Variables (IV) estimation addresses endogeneity concerns, further confirming the robustness of the results. Moreover, the analysis reveals that trade openness amplifies the positive impact of SESG on FDI, suggesting that GCC countries with liberal trade policies and robust ESG practices are more successful in attracting sustainable and responsible investments. These findings contribute to the growing body of literature on ESG and FDI, offering valuable insights for policymakers seeking to enhance economic growth through strategic investments in sustainability and governance. The findings offer valuable insights for policymakers in aligning SESG frameworks with global ESG standards and leveraging global liquidity conditions to enhance FDI inflows, particularly in light of ongoing economic diversification efforts in the GCC.

A Study of Long-Run Equilibrium Relationship Between Foreign Direct Investment and Its Key Determinants in Malaysia

This study investigates the long-run equilibrium relationship between foreign direct investment (FDI) and its key determinants in Malaysia. Employing the Autoregressive Distributed Lag (ARDL) model on annual data between 1971 and 2021. The key findings confirm a long-run equilibrium relationship between FDI and the selected macroeconomic variables as a group. However, the individual impact of gross domestic product, inflation, exchange rate, and trade openness on FDI is not statistically significant when analyzed separately. Specifically, the long-run results suggest that the determinants do not have significant effects on FDI. Meanwhile, the short-run relationship between FDI and its determinants in Malaysia reveals a complex interplay of factors. Inflation and exchange rates play significant roles, with inflation generally encouraging FDI and exchange rate volatility creating mixed effects. Trade openness on the other hand shows some short-run significance but it is not consistently impactful. The error correction (ECM) model also confirms the existence of a long-run relationship. It highlights that while short-term fluctuations can occur, FDI tends to move towards a long-term equilibrium influenced by a relatively moderate speed of adjustment. The key conclusion implies that FDI is influenced by the combined effect of these variables in the longer term, but the individual contribution of each variable is not strong enough to stand out statistically. This research contributes to the understanding of FDI dynamics in Malaysia by providing insights, thereby informing policymakers and investors about effective strategies to attract and leverage FDI for sustainable development.

Brexit and the Services Trade—A Longitudinal Analysis

This study investigates the impact of Brexit uncertainty on the UK's services sector trade from 2016 to 2019 revealing a statistically significant negative impact that varied across sectors and destinations. Using the OECD-WTO Balanced Trade in Services dataset and synthetic difference in differences methodology, the findings indicate an annual shortfall of US$23.7/£18.5 billion in UK services exports compared to a scenario where the UK remained in the EU, translating to a 5.65 percent reduction. The bilateral data suggests an 8.5 percent average decline, with larger exports to countries like Germany and the US being less affected than smaller bilateral exports. The UK bilateral exports to the EU declined by 6.21 percent, while Ireland’s exports expanded by 21.4 percent. The study highlights that small firms were disproportionately impacted, leading to a decline in trade openness and export activities. Methodological sensitivity is underscored, with various approaches estimating Brexit’s impact differently. Sectoral analysis shows significant declines in Travel, Insurance, Finance, Telecom, Business and Cultural Services. Ireland notably benefited post-Brexit, experiencing a 14.75 percent annual increase in services exports due to business relocations. The study emphasizes the critical yet underexplored consequences of economic disintegration on international trade in services, providing essential evidence for future UK-EU trade relations post-Brexit.

The Impact of Government Expenditure on Economic Growth in Malaysia

This study experimentally investigates the relationship between economic growth and government spending in Malaysia from 1990 to 2022 using time series data. The study analyzes the impact of total government spending on economic growth, covering housing, healthcare, social services, military, and education while identifying which sector has the most effect on economic growth. The Autoregressive Distributed Lag (ARDL) method is employed to evaluate the effects of these expenditures. The findings demonstrate that, in the short run, all variables significantly affect economic growth, hence refuting the null hypothesis. However, only trade openness and labor spending positively impact long-term economic growth. Research indicates that housing and education expenditures are the primary long-term drivers of economic growth in Malaysia. The data suggest that the Malaysian economy contradicts the Keynesian theory, as less government spending appears to improve the real GDP growth rate. The inverse relationship between government spending and economic growth indicates that government expenditure may not be the primary catalyst for economic growth, hence supporting Wagner’s law. These findings provide policymakers with essential insights for optimizing government spending to improve economic development results.

New emerging market economies and the roles of energy use, financial development and socioeconomic aspects

AbstractIn recent years, emerging market economies have consistently achieved growth rates above the world average. In this study, the nexus among economic growth, energy consumption, industrialization, financial development, trade openness, and urbanization were tested over the period 1995–2019 for selected emerging countries (Colombia, India, Indonesia, Kenya, Malaysia, Mexico and Poland). The main findings of this study are as follows: The results showed that energy consumption, industrialization, and financial development positively affected economic growth for the entire panel. While trade openness negatively affected economic growth, urbanization was statistically insignificant. The Dumitrescu and Hurlin causality test results indicate bidirectional causality between energy consumption and economic growth. Economic growth and energy consumption are the causes of industrialization. Thus, it can be concluded that a low-cost energy supply will help maintain economic performance with incentive policies such as tax deductions and credits provided for producers in the examined countries.

Deconstruction of green product innovation drivers for regional export-oriented industrial enterprises in China: the product space perspective

Achieving green economic growth requires enterprises to develop and promote green products that balance environmental protection, intensive resource utilization, and sustainable development. However, under the externality assumption, the green market is often faced with the challenge of insufficient supply. Based on 2004–2018 panel data covering regional industrial enterprises in 30 provinces in China, this study empirically tests the composite driving mechanism of the effect of an increase in the regional green production capacity, organizational factors, and environmental policies on the green product innovation (GPI) of regional export-oriented industrial enterprises (REIEs). This study finds that the increase in regional green production capacity directly drives an improvement in REIEs’ GPI level, that the regional green technology level and degree of human capital accumulation are indirect driving channels between capacity increases and product innovation, and that environmental regulations and green credit have a positive moderating effect on the influence of increasing green production capacity on GPI. Further threshold regression analysis reveals that increasing green production capacity, foreign direct investment, digitization, and trade openness have an inverted U-shaped promoting effect on GPI and that the proportion of local government expenditure shows a diminishing marginal utility effect on GPI.

How Financial Development Heterogeneity, Macroeconomic Volatility, Domestic Investment, and Digital Economy Are Driving Sustainable Economic Growth in Africa

The roles of finance are well stipulated in the various indicators of the sustainable development goals (SDGS). However, the extant literature still finds conflicting outcomes of the finance-led growth. Hence, this study redirects empirical evidence by unbundling the effects of financial development on sustainable economic growth into aggregated and disaggregated, focusing on seven robust indicators (financial development index, financial institution index, depth, and access, and financial market index, depth, and access) in selected African countries from 1995 to 2021. Similarly, the intervening roles of government expenditure, digital economy, domestic investment, human capital, macroeconomic volatility, and trade openness are evaluated based on advanced estimators. Findings show that the seven indices of financial development drive sustainable economic growth in Africa both in the long and short runs. Similarly, government expenditure, digital economy, and human capital promote sustainable economic growth both in the short- and long-term periods. The driving effects of domestic investment are only noticeable in the long run. Conversely, trade openness and macroeconomic instability are noted to be growth-deterring. Policy insights that support sustainable economic growth in Africa emanate from the outcomes.

How Financial Development Is Driving the Growth and Environmental Dimensions of Sustainable Development in Africa: Heterogeneous Analyses

Globally, we face a policy dilemma between desiring more economic growth and safeguarding the deteriorating ecosystem, which have an apparent trade-off. Consequently, financing growth often comes with strong concerns for the ecological implications, which is yet to be empirically resolved. Hence, the current study examined the growth and environmental effects of financial development from three angles, each with a robust indicator, comprising financial development index, financial institution index, and financial market index. The scope of this study was financial development in 30 selected African countries from 1996 to 2021. This study extends the frontier of knowledge by estimating the moderating roles of regulatory quality and digitalization coupled with other control variables: renewable and nonrenewable energy, government expenditure, trade openness, and foreign direct investment. The empirical evidence relies on estimators such as common correlated effects (mean group), the system-generalized method of moment, and method of moment quantile regression. The findings from this study reveal that financial development propels economic growth but to the detriment of the ecosystem. However, when the interactive effects of regulatory quality and digitalization are considered, the negative externalities of growth-induced financial development are reduced. Furthermore, control variables such as renewable energy and foreign direct investment promote growth without escalating ecological damage. This is in contrast to nonrenewable energy, government expenditure, and trade openness, which propel economic growth at the expense of the ecological system. Policy recommendations that balance the trade-off between the two measures are put forward based on the research outcomes.

Exploring the Dynamic Link Between Trade Openness, External Debt, and Economic Growth in Sub-Saharan Africa: Challenges and Considerations

This study investigates the dynamic relationship between trade openness, external debt, and economic growth in Sub-Saharan Africa, focusing on the period from 1990 to 2023. The research examines how trade openness and external debt impact regional economic performance by employing Panel Autoregressive distributed lag (ARDL) techniques utilizing the pool mean group and mean group estimator’s approach. The analysis reveals that while trade openness does not stimulate economic growth, external debt similarly has significant challenges, often hindering long-term development prospects within Sub-Saharan African countries. The findings underscore the importance of managing debt sustainably and aligning trade policies with growth-enhancing strategies. Additionally, human capital and institutional quality are essential endogenous growth factors that significantly influence economic growth in Sub-Saharan Africa. The study recommends that while trade openness alone may not directly drive economic growth, its benefits can be amplified by complementary strategies such as investing in human capital, technological adoption, and industrial policy. The study concludes with policy recommendations to enhance economic resilience and foster sustainable growth, such as attracting foreign direct investment, combined with infrastructure development and sound fiscal management.

Sustainable development goals in emerging markets: Aligning the role of financial inclusion in promoting environmental quality of the Next‐11 economies

AbstractPursuing sustainable development has emerged as a paramount global objective, with the United Nations' Sustainable Development Goals (SDGs) serving as a guiding framework. Increasing environmental degradation is associated with increased greenhouse gas emissions, deforestation, industrial waste, fossil fuel depletion, and loss of biodiversity. This study has analyzed the effect of financial inclusion on ecological sustainability while controlling the effect of financial development, energy consumption, economic growth, urbanization, and trade openness in the Next‐11 economies from 1995 to 2019. The study develops the financial inclusion index through principal components analysis by inculcating three demand‐side and three supply‐side factors of financial inclusion. To analyze the developed model, various first‐generation and second‐generation techniques are applied. The results of Westerlund co‐integration reveal significant long‐run co‐integration among the series. The long‐run elasticities are estimated through dynamic common correlated effect estimation and generalized method of moments where results reveal that FI helps to secure environmental sustainability by reducing the ecological footprint, hence it works on the SDG framework. Economic growth and financial development are found to be the root causes of increasing ecological footprint. So, it is the penetration of excessive credit, not the financial inclusivity which needs to be directed toward sustainability. It is suggested that the governments of Next‐11 countries should steer the capital toward sustainable usage and should continue facilitating financial services to curtail environmental degradation. Our findings have significant repercussions for Next‐11 countries, giving decision makers fresh perceptions of financial inclusion and development implications.

Econometric analysis of factors influencing export performance of soybean (Glycine max) production in NIGERIA: An auto-regressive distributive lag (ARDL) approach

This study presents an econometric analysis of factors influencing the export performance of soybean (Glycine max) production in Nigeria using an auto-regressive distributive lag (ARDL) approach. The study used a secondary data covering the period from 2011 to 2022. The used data were collected from CBN (Central Bank of Nigeria), NBS (National Bureau of Statistics), FAO (Food and Agriculture Organization), and the General Household Survey-Panel (GHS-P) in conjunction with the Federal Ministry of Agriculture and Rural Development, and the World Bank publication. The data analysis included descriptive statistics, Augmented Dickey-Fuller (ADF) unit root test, Bound test, ARDL, and principal component model. The result of the ADF unit root test showed that the trade openness, consumer price index, exchange rate, population growth, world trade in oil seeds, agricultural labor, and soybean production were stationary at first difference I (1), while agricultural machinery was stationary at level I (0). The results of ARDL method showed that the consumer price index, population growth rate, world trade in oil seeds, agricultural labor, and agricultural machinery were significant factors influencing export performance of soybean in Nigeria. The trade openness and exchange rate were not different significantly from zero. The trade openness could not expand market access due to non-competitiveness of the Nigerian’s soybean. The exchange rate has lost its role with respect to soybean seed partners in international trade. The policies that would encourage exportation of this crop should be pursued by provision of storage facilities, granting of tax holidays, long term export credit at concessionary interest rate to exporters, and research activities towards improving the quality of produced agricultural products. Keywords: Export Performance, Augmented Dickey-Fuller, Auto-Regressive Distributive Lag, Soybean Production, Nigeria

Deciphering the complex interplay: Heterogeneous, threshold, and mediation effects of trade openness on CO2 emissions in Africa.

Despite having barely anything to do with the issue of CO2 emissions, Africa has been experiencing more severe climate change and its adverse effects than most other regions of the globe. However, the issue of CO2 emissions and its adverse effects has received relatively little attention in the African research arena. To this end, the present research assesses the effect of trade openness on the CO2 emissions utilizing panel data from 46 African countries spanning 2000 through 2022. To account for the possible heterogeneity and nonlinearity, the panel quantile regression and threshold methods were employed. Moreover, this study investigates the key mediating effects of the channel. The empirical findings show that greater trade openness is associated with significantly higher CO2 emission, additionally; it demonstrates that the influence is heterogeneous across different CO2 emission quantiles in African countries. Besides the result from the double threshold model reveals a complex, nonlinear relationship between trade openness and CO2 emissions in Africa. Moreover, the findings divulge that openness to trade indirectly reduces CO2 emissions through the substitution and technology channels whereas it indirectly increases carbon dioxide production via the economic track. Therefore, it is vital to promote the use of renewable energy, effectively leverage the knowledge spillover effects of trade to decrease energy intensity and formulate pertinent policies aimed at curbing carbon emissions and addressing the imminent threat of climate change in Africa. Besides, the nonlinear and heterogeneous effects of trade openness on CO2 emissions suggest that policies and interventions related to the impact of trade openness on CO2 emissions should consider the current level of carbon dioxide emissions.

Analyzing the Impact of Vision 2030’s Economic Reforms on Saudi Arabia’s Consumer Price Index

This study examines the relationship between CO2 emissions, labor force participation, foreign direct investment (FDI), and trade openness on the Consumer Price Index (CPI) in Saudi Arabia, within the context of Vision 2030’s economic reforms. Vision 2030 aims to diversify the economy, reduce oil dependency, and promote sustainable growth, making it crucial to understand the factors influencing inflation and economic stability. Using annual data from 2001 to 2022 and the nonlinear Autoregressive Distributed Lag (NARDL) bounds testing approach, the study analyzes both short- and long-term effects. The findings reveal that higher CO2 emissions have a deflationary effect, reducing the CPI in both the short and long term, while FDI shows an inflationary impact with a delayed effect. Labor force expansion contributes to lowering the CPI, reflecting its deflationary pressure, especially over the long term. Trade openness is also examined for its dual effects on CPI, In the short run, both positive and negative trade openness reduce consumer prices, while in the long run, positive trade openness increases inflation, and negative trade openness lowers prices. This shows the differing inflationary impacts of trade openness over time. These findings contribute to the policy discourse on balancing economic growth, environmental sustainability, and inflation management, offering strategic insights for policymakers in alignment with Saudi Arabia’s Vision 2030 objectives.

The Interaction of Global Economy Mobility on the Financial Performance of Flagged Airlines

This study examines the impact of global economic mobility and domestic production on revenue and EBITDA, which are income statement performance indicators of flagged carrier’s airline companies. The research question is whether the global economic trade mobility and domestic production will lead to an effect in the number of individuals traveling, and thus eventually affect the revenue and profitability performance of airline companies. There are studies in the literature that have selected macroeconomic indicators as affecting travel volume and financials. In this study, trade openness and direct investments represent the global economy's mobility. Short-term interest rates, oil prices and exchange rates are included in the model as a control variable. The results of the panel model indicate that trade openness have a positive effect on firms' revenues. Airline companies should develop their financial forecasts by monitoring the macroeconomic indicators that have shown significant results from empirical analysis.

Retraction Note: The role of economic production, energy consumption, and trade openness in urbanization-environment nexus: a heterogeneous analysis on developing economies along the Belt and Road route.

Retraction Note: The role of economic production, energy consumption, and trade openness in urbanization-environment nexus: a heterogeneous analysis on developing economies along the Belt and Road route.

Examining the Influence of Renewable Energy Consumption, Technological Innovation, and Export Diversification on Economic Growth: Empirical Insights from E-7 Nations

The present research focuses on the endogenous development theory and investigates the relationships between economic growth (dependent variable) and renewable energy consumption, technological innovation, and export diversification (independent variables) in seven emerging economies known as the E-7. Previous studies have examined these factors individually but have not explored their combined impact on the E-7 economies. Therefore, this study contributes to the existing literature on the effects of renewable energy consumption, technological advancement, and export diversification on economic development. This study analyses the dynamic connections among these variables in seven selected emerging countries: Brazil, China, Indonesia, India, Mexico, Russia, and Turkey. Panel data from 1990 to 2022 are utilised, and various methodologies, including panel cointegration, the pooled mean group–autoregressive distributed lag (PMG-ARDL) estimator, and robustness tests, such as the fully modified ordinary least square and dynamic ordinary least square tests, are employed. Empirical inferences are drawn using the Dumitrescu–Hurlin panel causality (DHC) test, and the long-run relationships among the variables are validated using the Westerlund residual cointegration tests. The results from the PMG-ARDL estimator show that renewable energy consumption, technological advancement, and export diversification have a significant and positive impact on economic expansion, confirming the validity of the endogenous growth model in the E-7 countries. The control variable of the financial sector has a positive but insignificant effect on economic growth, while trade openness has a negative and significant effect. The DHC test results indicate a neutral feedback effect of renewable energy consumption on economic growth. The findings also reveal a unidirectional causal relationship between technological innovation and economic growth. Overall, these findings provide valuable insights for economic policymakers in the E-7 countries. By removing barriers to renewable energy consumption, technological innovation, and export diversification, policymakers can promote sustainable economic development.

Financial inclusion, financial stability, and poverty reduction in Africa

AbstractFinancial inclusion universally remains one of the critical means to end poverty in the world, especially Africa, where the level of poverty is high. It has however been argued that financial inclusion equally has the tendency to destabilize the financial system, thwarting the poverty reduction efforts, which necessitates the interrogation of the relationship between the variables. This study therefore investigates how financial stability mediates the financial inclusion and poverty reduction relationship in Africa. Using the panel Autoregressive Distributive Lag model, covering a period of 2004–2020, the study found that financial inclusion is positively related to financial stability in both short and long‐run, with education, Gross National Income per capita (GNI) and domestic credit to private sector, contributing to financial stability, and trade openness negatively related to financial stability in the long‐run. The study further established that financial stability is positively related to household consumption expenditure as such leads to poverty reduction with trade openness, government expenditure, GNI, education, domestic credit to private sector, and institutional quality contributing significantly to poverty reduction. This confirms the mediating role financial stability plays in enhancing the impact of financial inclusion on poverty reduction in Africa and must therefore be given the necessary attention, through proper regulatory mechanisms.

The moderating effects of environmental and regulatory quality on financial development to promote sustainable FDI inflows in Canada

Stimulating sustainable FDI through the connection of financial development and its moderating relationships with environmental quality and regulatory quality emerges as a crucial agenda nowadays. This study investigates into this relationship using quarterly data from 1990Q1 to 2022Q4 for Canada; employing ARDL bound tests, Granger Causality, and FM-OLS econometric models. Foreign direct investment is the dependent variable of this study. The findings confirm significant long-run relationships among financial development, stock market development, and the moderating effects of environmental and regulatory quality on FDI inflows in the Canadian economy. Conversely, in the short run, financial development, stock market development, and economic growth exhibit bidirectional causal links with FDI, while environmental quality, regulatory quality, and trade openness demonstrate unidirectional causal links with FDI. The error correction mechanism indicates that all variables quickly return to equilibrium except trade openness. Robustness checks further confirm that all the variables have fully modified co-integrating relationship with FDI inflows including the moderating effects of environmental and regulatory quality which is the innovation in the FDI-Growth existing literature. Thus, policymakers are urged to prioritize environmental quality and regulatory quality, alongside other significant explanatory variables identified in this study to promote sustainable FDI inflows.

The macroeconomic determinants of trade openness in Latin American countries: A panel data analysis

Background Trade openness shows a positive impact on economic growth, supported by economic theory, and export diversification and economic complexity show a positive dynamic in trade openness in the world; however, a specificity is generated in South American countries. Therefore, the objective of the research is to analyse the macroeconomic determinants of trade openness in Latin American countries. Methods The research approach was quantitative and explanatory using panel data methodology from the databases of the World Bank, Harvard University and the Economic Commission for Latin America and the Caribbean for the period 2000-2020. Results The fixed effects panel data model showed that the variables that had a negative impact on trade openness were GDP, the economic complexity index and the logistic performance index, while the variables that had a positive impact were exports of high-tech products (a proxy for innovation), exports, imports, research and development expenditure and interregional trade in goods. Conclusions Therefore, during the analysis period of 2000-2020 in South America, based on the panel data analysis under fixed effects, a total of 8 countries had a negative impact on trade openness, and only the economies of Chile, French Guiana, and Brazil had a positive impact on trade openness; these economies are characterized by their better performance in the economic complexity index, their higher percentage of budget for research and development expenses, and their trade policies oriented towards the industrialization of their value-added products.

Navigating carbon neutrality pathway beyond energy and economic agents: the influence of media liberty across the OECD countries

Abstract Press freedom is a fundamental aspect of democratic societies, playing a critical role in shaping public discourse, fostering transparency, and holding institutions accountable. Furthermore, its impact extends beyond political and social realms to encompass environmental sustainability, particularly in Organisation for Economic Co-operation and Development (OECD) countries. While extensive research has been conducted on the economic, social, and institutional factors that influence environmental outcomes, the role of press freedom in shaping ecological footprint remains underexplored. However, this study aims to address this gap by examining the relationship between press freedom and ecological footprint across 36 OECD countries from 2013 to 2022. Utilizing a system generalized method of moments (GMM) analysis and controlling for economic growth, trade openness, and energy consumption, this research reveals significant findings. Specifically, it demonstrates that press freedom serves as a catalyst for reducing ecological footprint, presenting OECD countries with a unique opportunity for environmental gains and potentially achieving carbon neutrality. In contrast, we find indicators such as economic growth, energy consumption, and trade openness have negative impact on environmental quality. Overall, this study underscores the importance of promoting press freedom as a key strategy for advancing environmental sustainability and calls for concerted efforts to harness its potential for mitigating ecological footprint in OECD countries and beyond.