Globalization and Economic Growth: Empirical Evidence from Nigeria

Topics: Economics, Economic growth, Macroeconomics Pages: 17 (5804 words) Published: January 1, 2013
GLOBALIZATION AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM NIGERIA

By

KELECHI IYOKO.

Abstract
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.

INTRODUCTION
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...


References: Aina, T. A (1997). “ Globalization and social policy in Africa :Issues and Research” Director. Dakar CODESRIA
Agenor, P .R (2002) Does Globalization Hurt the Poor? The World Bank Washington D.C 20422, September 9
Bala V (2003). “Openness and Economic Growth. Empirical Evidence on the relationship between Output and Inward FDI” Journal of Business
Ben-David, D, H.Nordstrom and L.A Win ters (2000)
Chanda, A (2002) “The Influence of Capital Controls on Long-run Growth: Where and How Much? Working Paper, North Carolina State University.
Central Bank of Nigeria
De Mello, L (1999). “Foreign direct Investment-led growth: Evidence from Time Series and Panel Data” Oxford Economic Papers, 51,(1), 133-51
Eboreime, M, and E Iyoko
Edwards, S.(1998). “Openness, Productivity and Growth: What do we really know” Economic journal, 108, March, 389-98.
Edison, H, M. Klein, L. Ricci and T. Slok (2002). “Capital Account Liberalization and Economic Performance; a Review of Literature” IMF working Papers, 02/120, July, Washington D.C
Martin, K.M (1992)
Ndiyo, N.A and E.S Ebong (2003). “Challenges of Openness in Developing Economies: Some Empirical Lessons from Nigeria”. Paper Presented at the 45th Annual Conference of The Nigeria Economics Society (NES).
Obandan, M.I (2003).” Globalisation and Economic Management in Africa”. Paper presented at the 44th Annual Conference of The Nigeria Economic Society (NES), Ibandan, 27-29 August.
Ojo, O and T.Oshiokoya (1995). “Determinants of Long-term Growth. Some Africa Results” Journal of African Economies, 4 (2), October:163-91.
Onyemenan .C.E (2004). Firm Level Competitiveness in Nigeria. Presentation of the ODI-NESG Seminar, on maximizing Pro-Poor Growth. Regenerating the socio-economic database in Nigeria. June 15-16, City University, Uk.
Onyeonoru. I. (2003).”Globalisation and Industrial performance in Nigeria” CODESRIA. 28, (3 &4): 36-66.
Onwuka E.C and A.Eguavoen (2007). Gloalisation and economic Development: the Nigeria Experience. Journal of Social Science. 14 (1), 45-51
Reisen, H and M
Rodriguez, F and D. Roderick (2001).”Trade Policy and Economic Growth. A Skeptic Guild to the cross-National Evidence” In: Ben S. Bernanke and Kenneth Rogoff (eds). NBER. Macroeconomic Annual 2000. Cambridge, Mass. MIJ Press.
Scholte.J.(2000). Globalization: a Critical Introduction. London Macmillan Press.
Spybee, T (1996). Globalization and World Society. Cambridge Policy Press.
Uwatt. B.U (2003). “Globalization and Economic Growth: The Africa Experience. Paper presented at the 45th Annual Conference of The Nigeria Economic Society (NES). August
World Bank (1999)
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Economic growth Essay
  • Economic Growth in Nigeria Essay
  • Globalization Economics Essay
  • China’s Economic Growth and Development Essay
  • Empirical Analysis of the Links Between Money Market Activities and Economic Growth in Nigeria Essay
  • Financial Development and Economic Growth: Evidence from China Essay
  • Relationship Between Energy Consumption and Economic Growth: Empirical Evidence for Singapore Essay
  • Growth in Nigeria Economics Essay

Become a StudyMode Member

Sign Up - It's Free