Abstract
This study uses Nonlinear Autoregressive Distributed Lag (NARDL) cointegration model to investigate the relationship between trade openness and economic growth in Burkina Faso over the period 1965 to 2017. This study highlights the asymmetric effects of trade openness on economic growth. Both theory and empirical investigations on the link between trade openness and economic growth show conflicting results. Theoretical work has not found consensus on the impact of trade openness on economic growth. From the empirical literature, the results of each study strongly depend on the method of investigation, the assumptions made as well as the country under investigation. The empirical results from this study show that there are differences in the short term and long-term effects of trade openness on economic growth. While an increase in trade openness enhances economic growth in the long run in Burkina Faso, in the short run, the increase in trade openness hinders economic growth. This study recommended that policymakers in Burkina Faso should undertake measures to reduce tariff and non-tariff barriers that constitute obstacles to the development of foreign trade. Moreover, the State should continue to modernise and simplify customs procedures and revitalise programmes promoting foreign trade. Efforts should be deployed to increase the development of the financial sector to mobilize national savings to support investment opportunities in the country. Finally, authorities and policymakers should direct FDI towards the manufacturing sector as the manufacturing sector offers huge opportunities for economic growth through technology upgrading and scale economies.
M.Phil. (Industrial Policy)