International Trade and Economic Growth: A Cointegration Analysis for Botswana

Abstract

This paper assesses the cointegrating relationship between international trade and economic growth in Botswana from the period of 2011 to 2020 using quarterly time series data. The data was checked for stationarity using the Augmented Dickey Fuller (ADF) and found to be integrated at the same level or order. Johansen Cointegration approach and VECM technique were employed to assess long run and short-run relationship. Long run relationship estimation result shows positive and significant relationship between trade openness, trade balance with GDP in the long run while inflation and custom duties were negatively related to GDP. Short-run relationship estimation result shows a positive and significant relationship between trade openness and inflation while trade balances have no effect on the GDP and custom duties were negative related to Gross Domestic Product. The speed of adjustment term was also found to be statistically significant with a negative sign. Basing on above results there is dynamic relationship between international trade and economic growth.