Trade Liberalization and FDI: A Cointegration and Causal Analysis for Benin

8 Pages Posted: 14 Nov 2012

Date Written: October 1, 2012

Abstract

The period following mid-1970s marked the implementation of liberal trade policies by African economies to attract FDI for sustainable economic development. This paper estimates a structural VECM and investigates the long-run effectiveness of trade liberalization as an FDI policy measure for Benin. The Johansen cointegration test identifies significantly positive long-run impact of trade openness on FDI inflows into Benin. Granger causality establishes unidirectional causal link from trade openness to FDI inflows. Based on the cointegration and causal analysis, greater participation in international trade by Benin will expectedly increase FDI inflows into the economy.

Keywords: FDI, VECM, unit root, cointegration, granger causality

JEL Classification: F21, F41, F42

Suggested Citation

Mitra, Rajarshi, Trade Liberalization and FDI: A Cointegration and Causal Analysis for Benin (October 1, 2012). Proceedings of 19th International Business Research Conference 2012. Available at SSRN: https://ssrn.com/abstract=2174955 or http://dx.doi.org/10.2139/ssrn.2174955

Rajarshi Mitra (Contact Author)

Kyushu University ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan

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