Threshold Effects of Import Dependence on Economic Growth in Nigeria

22 Pages Posted: 5 Jan 2022

See all articles by Oziengbe Aigheyisi

Oziengbe Aigheyisi

University of Benin - Department of Economics & Statistics

Date Written: December 31, 2021

Abstract

This study uses annual time series data spanning 1981–2018 to investigate the threshold effects of import dependence on economic growth in Nigeria. The ordinary least squares (OLS) and the fully modified OLS (FMOLS) techniques are employed for estimation of a quadratic regression model to determine the nature of the relationship between aggregate import dependence and economic growth. It is found that the relationship is concave, that is, it follows an inverted-U shape. The conditional least squares estimator is thereafter employed to estimate the threshold model specified to determine the threshold level of import dependence. The study finds a threshold level of 26% for aggregate import dependence. Below this threshold, import dependence positively affects economic growth; above the threshold, the growth effect of import dependence is adverse. Furthermore, it is found that the long-run growth effect of Inflation is adverse, and investment is favourable to long-run economic growth. Based on these findings, the paper recommends efforts by Nigeria’s government to reduce import dependence below the estimated threshold of 26%, control inflation and encourage investment so as to enhance the growth of the nation’s economy

Keywords: economic growth import dependence, import penetration, Nigeria, threshold regression

JEL Classification: F14, F41, F43

Suggested Citation

Aigheyisi, Oziengbe, Threshold Effects of Import Dependence on Economic Growth in Nigeria (December 31, 2021). Available at SSRN: https://ssrn.com/abstract=3999462

Oziengbe Aigheyisi (Contact Author)

University of Benin - Department of Economics & Statistics ( email )

Benin City, Edo State
Nigeria

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