Economic Globalisation and the Islands of the Indian Ocean: An Econometric Analysis

Abstract

This study investigates economic globalisation’s impact on Indian Ocean islands from 1980 to 2020, focusing on the influence of trade, foreign direct investment (FDI), population, and financial aid on economic growth. Using a robust co-integration and causality approach, the study reveals that trade openness negatively impacts economic growth, whereas FDI and population exert a positive influence. Conversely, financial aid is found to have no significant effect on development. Detailed case studies of Comoros, Madagascar, Maldives, Mauritius, Seychelles and Sri Lanka indicate distinct policy interventions tailored to each nation’s unique challenges and opportunities. This research significantly contributes to the limited literature on globalisation’s effect on island economies and provides actionable recommendations for policymakers to foster sustainable economic performance and resilience in the Indian Ocean region.