DYNAMIC EFFECTS OF TRADE OPENNESS AND FINANCIAL DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA: A RECONSIDERATION BASED ON BOOTSTRAP CAUSALITY TEST
DYNAMIC EFFECTS OF TRADE OPENNESS AND FINANCIAL DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA: A RECONSIDERATION BASED ON BOOTSTRAP CAUSALITY TEST

Summary/Abstract: The dynamic effects of trade openness and financial development on economic growth are re-examined in Nigeria between 1986 and 2016 using the Autoregressive Distributed Lag (ARDL) and bootstrap causality test with endogenous lag order, developed by Hacker and Hatemi-J (2012). We explore a comprehensive financial development index that covers financial institutions and financial markets based on deepness, accessibility, and efficiency of the markets. The empirical results provide that trade openness dampens economic growth while financial development, oil rent, and gross capital formation stimulate economic growth. The results based on a bootstrap causality test support the growth-led financial development hypothesis and growth-led gross capital formation hypothesis. The results further suggest that causality runs from trade openness to oil rent while gross capital formation Granger-cause trade openness. These results, therefore, have numerous policy implications for Nigeria as a net oil exporter.

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