Does international trade promote economic growth? An evidence from Brunei Darussalam

Abstract

Purpose The purpose of this paper is to explore the potential impact of trade openness on economic growth for the economy of Brunei Darussalam. Design/methodology/approach Empirical analyses are conducted using the autoregressive distributed lagged model (ARDL) procedure and the data used were spanning from 1989 to 2018. Findings The obtained results indicated a positive and statistically significant relationship between trade openness and economic growth. Similarly, the results also revealed that domestic investment and natural resources positively impacted economic growth. Further, this paper found that human capital has impacted economic growth both negatively and significantly, which is against the prior expectation. Moreover, in the short-run, trade openness and domestic investment have lost its significance level while all other variables have maintained both their significance levels and signs of their coefficients. Practical implications This paper has provided comprehensive evidence regarding the relationship between trade openness and economic growth for Brunei Darussalam. Therefore, the policymakers of Brunei are suggested to take practical steps to gear up trade liberalization, and hence attain higher growth. Further, a favorable attention is also needed toward economic diversification and encouraging domestic investment to accelerate the long-run economic growth. Originality/value As this is a comprehensive study on the economy of Brunei Darussalam, therefore, this paper expects that the policymakers would find it useful while formulating and exercising suitable policies related to trade openness.

Natural resources and economic growth: evidence from Brunei Darussalam

“…The trade liberalization policies adopted by Brunei Darussalam over the years have improved economic growth. In the estimated equation, the coefficient of trade openness is not only positive but also statistically significant, which supports previous literature (Dollar, 1992; Frankel and Romer, 1999; Tahir and Hayat, 2020). Trade openness influences economic growth by improving productivity, especially in the manufacturing sector, allows access to advanced technologies and further promotes healthy competition between companies (Tahir and Hayat, 2020).…”

“…In this section, we consider the validity of the estimated models by conducting a range of different tests. The literature has highlighted a number of diagnostic tests in the ARDL framework to validate estimated models (Tahir and Hayat, 2020). Both serial correlation and heteroscedasticity are not present as both the LM test and White tests are insignificant as shown in Table 6.…”

“…It has been already acknowledged by the researchers that the statistical properties of ordinary least squares (OLS) are only valid when variables are stationary. If the underlined data are nonstationary, then the OLS estimator is not recommended for the estimation as the obtained results would be spurious (Tahir, 2020; Tahir and Hayat, 2020). The OLS estimator requires the variables to be stationary, which is rare in time series models.…”

The Impact of Monetary Policy and International Trade on Economic Growth and Inflation in ASEAN-4 Countries

“…This study fills the research gap by combining factors that affect economic growth and inflation, in previous studies only analyzing factors that affect economic growth (Akinwale & Grobler, 2019;Kallianiotis, 2019;Olamide et al, 2019a;Olamide et al, 2019b;Okoro et al, 2020;Solina & Ocampo, 2020) and inflation (Dua & Goel, 2021;Temitope, 2020;Tung, 2021) separately. In addition, this study uses panel data autoregression vector analysis, where previous research only focused on time series data analysis (Tadesse & Melaku, 2019;Tahir & Hayat, 2020;Tulasi, 2021) or panel data analysis (Younsi & Nafla, 2019;Okoro et al, 2020). This study will re-confirm whether the monetary policy stance through interest rates is the right instrument in maintaining price stability and encouraging economic growth, particularly in Indonesia, Malaysia, the Philippines, and Thailand.…”

“…Research byRaza et al (2018) in the United Arab Emirates shows that exports positively affect economic growth. However, imports harm economic growth, andTahir & Hayat's (2020) research shows a positive effect of trade openness on economic growth in Brunei Darussalam.…”