American Journal of Economics, Finance and Management
Articles Information
American Journal of Economics, Finance and Management, Vol.5, No.1, Mar. 2021, Pub. Date: May 31, 2021
Trade Openness and Economic Growth: Long-run Cointegration Relationship in Democratic Republic of the Congo
Pages: 14-22 Views: 563 Downloads: 105
Authors
[01] David Masamba Famode, Economics Department, Faculty of Economics and Management, University of Mbandaka, Mbandaka, Democratic Republic of the Congo.
[02] Patrick Matata Makalamba, Economics Department, Faculty of Economics and Management, University of Kisangani, Kisangani, Democratic Republic of the Congo.
[03] Medard Nguba Mundala, Economics Department, Faculty of Economics and Management, University of Lubumbashi, Lubumbashi, Democratic Republic of the Congo.
Abstract
The purpose of this study was to estimate the long-run cointegration relationship between trade openness and economic growth in Democratic Republic of the Congo (DRC), concerning period from 1970 to 2019. We add the investment like control variable of trade openness effect. The time series data collected from World Bank (WB). Using Augmented Dickey-Fuller (ADF) test showed that temporal series are non-stationary. Johansen test conducted to long-run cointegration relationship existence between variables. The vector error correction model (VECM) estimation revealed a negative trade openness impact on growth in long-run. In addition, it showed a positive investment impact on economic growth. This confirmed theory about link between investment and growth. This paper adds to current literature a result following that a trade negative impact exists on growth, by examining the connection between these variables, using VECM estimation for DRC. The main result implies that DRC must realize some conditions permitting to approach the theoretical stipulation. We note that investment in infrastructures of domestic activities connection constitute an important condition, which can allow trade openness to increase growth. Moreover, Government must have courage to reduce importations in yielding local goods and services of substitution.
Keywords
Trade Openness, Economic Growth, Investment, Cointegration Relationship, DRC
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