Does Meaningful Relationship Exist Between Trade Liberalization and Economic Growth? A Case Study of a Small Open Economy

Abstract

Using quarterly data between 1981q1 and 2018q4, the paper investigates the relationship between trade liberalization and economic growth in Nigeria. Exploring Johnasen cointegration technique and the Vector Error Correction (VEC) method, the paper considers three alternative measures of trade liberalization to determine whether the response of economic growth to trade liberalization is sensitive to the choice of the indicators of trade liberalization under consideration. The paper finds significant effects of trade liberalization on the economy. The paper recommends that government should implement policies that will promote trade openness in Nigeria. This may be achieved by establishing bilateral and multi-lateral agreements that are favourable and that will support appropriate technology transfer to domestic producers. JEL classification numbers: F31, F13, F41. Keywords: Trade liberalization, Tariffs, Economic growth, Nigeria.