Relationship between International Trade and Economic Growth: A Cointegration Analysis for Zimbabwe

Abstract

The relationship between trade and economic growth has continued to dominate the debate in trade and development economics. Generally, countries which trade more have been seen to have a high growth path, some of which has been attributed to trade. However, it is very difficult to attribute much of the growth to trade and trade openness. The focus of this research paper is therefore to investigate if there exists a long run relationship between various trade and other macroeconomic variables for Zimbabwe for the period 1975 to 2005. The study employs the cointegration approach to establish the existence of a long run relationship between economic growth and trade variables. The results of the study indicate that trade and economic growth are cointegrated, but the relationship is strengthened by the stability of the macroeconomic policy since negative macroeconomic drivers such as rising inflation can constrain economic growth. Openness to trade is also deemed to play a crucial role, where reduction and elimination of barriers to trade promote growth in trade and ultimately economic growth.

DOI: 10.5901/mjss.2014.v5n20p621