GLOBALIZATION AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM NIGERIA
The concomitant unequal distribution of the benefits of Globalisation and the fear expressed by most developing countries about the negative impact of globalization, has made the question on the relationship between globalization (characterized by foreign direct investment, economy openness and net capital flows) and Economic Growth both in developed and developing countries lie at the heart of debates on economic development policy. This paper investigates the causal relationship between globalization (characterized by FDI and Openness) and Economic Growth using co-integration techniques on time series data in Nigeria. The result of the study shows a unidirectional causality between FDI and Growth with FDI Granger causing growth while there was no causality between Openness and Growth. Rather, openness Granger causes external debt in Nigeria. The study encouraged that the country should imbibe some of the sketched contours of an appropriate development strategies for developing economies which includes debt reduction, domestic fiscal discipline, effective exchange rate policy and the diversification of the domestic base. Keywords: Globalization, Economic Growth, Granger causality, Nigeria.
Globalization and economic competitiveness remains one of the most controversial subjects in recent discourse. Several authors have critically examined its usage, ideological implications and economic benefits associated with it (Spybee, 1996; Scholte ,2000; Onyeonoru, 2003; Onyemenan, 2004; Eboreime and Iyoko 2008).
Globalization which is characterized by an intensification of cross-border trade and increased financial and foreign direct investment flows promoted by rapid liberalization presupposes that globalization is beneficial to the extent that it can lead to increase in capital flows and economic growth. Yet the concomitant unequal distribution of these benefits and the fear expressed by most developing countries about the negative impact of globalization, has made the question on the relationship between globalization (characterized by foreign direct investment, economy openness and net capital flows) and economic growth both in developed and developing countries lie at the heart of debates on economic development policy.
The empirical result on the relationship is neither straight forward nor clearly distinct. While several researches using different approaches have found growth to be enhanced by globalization and its channels (Ojo and Oshikoya, 1995; Edwards, 1998; Ben-David et al 2000), others found a negative effect of globalization characterized by openness and FDI on growth (Ndiyo and Ebong, 2003; Edison et al, 2002; Reisen and Solo-2001). The negative result on the affect of globalization was attributed to the economic situation in the countries under the study. Most of these countries mere not fully ready and developed to stomach and accommodate globalization and the competitiveness associated with it. It further points out that the level of development of a country in terms of her domestic financial system and other factors determines the flow of globalization and its benefits. Therefore, it becomes imperative not just to investigate if there is a relationship between globalization and economic growth but also to investigate the causal link between globalization and economic growth given that globalization and economic growth are determined simultaneously. Thus the objective of this paper is to investigate the causal relationship between globalization and economic growth using co-integration techniques on time series data in Nigeria. So far, majority of the empirical studies focused only on the relationship between globalization and economic growth. Only few studies have looked at the causality relationship between globalization’s channels and economic growth in a developing country like...
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