Trade openness and economic growth in the Comoros

Abstract

The main objective of this paper is to examine the impact of trade openness on economic growth in Comoros over the period 1990-2019. In order to capture the relationships between the variables of interest, the study was conducted using time series analysis methods. The econometric estimation of the coefficients of the regression factors was carried out using the ARDL model. Following the procedure of Pesaran et al. (2001), we concluded that there was a cointegrating relationship between the variables at the 5% threshold, thanks to the cointegration test at the bounds. This allowed us to estimate the coefficients at the TC and the elasticities at the LT. We find that trade openness fails to affect economic growth in the short run. We have to allow time to pass before we can expect a change in economic growth. And in the long run, the effect of trade openness on economic growth in the Comoros is negative. Moreover, with the exception of gross fixed capital formation and financial development, whose effects on economic growth are negative, the other control variables show the expected (positive) effects in the long run. This counter-intuitive result can be attributed to the absence or low effectiveness of economic policies, political instability, etc. Consequently, as a strategy to stimulate economic growth, the Comoros should promote appropriate trade policies aimed at encouraging increased local production of products to reduce imports and stimulate exports.

Keywords: economic growth, trade openness, ARDL model, Comoros

JEL Classification: B23, F14, O47

Paper type: Empirical research