Does trade openness spur economic growth in Botswana? An empirical investigation

Abstract

In this paper, the dynamic relationship between trade openness and economic growth in Botswana is examined using the Autoregressive Distributed Lag (ARDL) bounds testing approach. In order to test the robustness of the results, four proxies of trade openness were used in the estimation. Three of the four proxies were constructed from trade ratios, while the fourth proxy was a composite index of trade openness. The idea behind the use of different proxies was to ascertain whether the impact of trade openness in Botswana depends on the type of trade openness taken into consideration. The empirical results of this study reveal that, when the ratio of exports plus imports to GDP is used, and when the ratio of exports to GDP is used as a proxy for trade openness, then , trade openness has a significant positive impact on economic growth in Botswana, both in the short run and in the long run. Likewise, when the trade openness index is employed in the empirical investigation, the results show that in both the short run and the long run, trade openness has a significant positive impact on economic growth. The overall results of this study, therefore, have important policy implications for Botswana. Among other things, Botswana’s policy makers should pursue policies that boost the country’s exports and total trade.