The Interaction Effect of Institutions and Trade Liberalization on Economic Growth in Africa

MATTHEW A.O¹ , ODUNTAN E.A.² , ADEDIRAN O.S.³

Section:Research Paper, Product Type: Isroset-Journal
Vol.3 , Issue.4 , pp.1-11, Apr-2017

Online published on Apr 30, 2017

Copyright © MATTHEW A.O, ODUNTAN E.A., ADEDIRAN O.S. . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
This study sets out to examine the interaction effect of institutions and trade liberalization on economic growth in selected African countries using panel data. There is a general discourse that the growth of a country depends on the level of investment which can be achieved most times via engaging in trading activities with other countries of the world. International trade, on the other hand, is enhanced by the presence of strong institutions. It has been observed that the combination of institutions and trade liberalization affect the economic growth of African countries. Finding out which of the institutions would best aid international trade and boost growth more is the aim of this study. This study used secondary data of forty African countries and employed the Least Square Dummy Variables (LSDV) and the Generalized Method of Moments (GMM) econometric techniques for estimation. The major finding of the study revealed that the interaction effect of trade liberalization, political and cultural institutions is stronger than the interaction effect of trade liberalization and economic institutions hence economic growth tends to be better in the former case than the latter in the selected SSA countries. Therefore, the study recommends that attention should be paid to the development of the economic, political, and cultural institutions simultaneously by the governments of the African countries.

Key-Words / Index Term :
Interaction Effect, Trade Liberalization, Institutions, Economic Growth, Africa

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