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Abstract

This study investigates the tripartite relationship between trade openness, foreign direct investment and the performance of the Nigerian economy within a framework of macro econometric model. The theoretical underpinning for this study is the factor proportion model of international trade, Flying Geese FDI model and the Keynesian Mundell-Fleming IS-LM framework. The study used secondary data spanning from 1970 to 2018 for within sample forecast and a five-year out-of-sample forecast, spanning from 2019 to 2023 was performed under four policy scenarios in line with the Economic Recovery and Growth Plan (ERGP). The findings reveal that trade openness attracts foreign direct investment and they affect macroeconomic performance in Nigeria through direct and indirect channels. The simulation results established that increase trade openness, FDI, government expenditure and broad money supply would bring about increase in the endogenous variables such as private investment, real consumption, outputs of oil and non-oil, significant increase in non-oil exports, and government revenues among others. The study recommends that in line with ERGP, government should build a globally competitive economy and improves on the business environment; there should be diversification from oil to non-oil and from narrow gauge primary exports to finished products; CBN should ensure macroeconomic stability as a strategy for trade openness and attraction of FDI.

Keywords

Trade Openness Foreign Direct Investment Economic Performance Simulation

Article Details

How to Cite
KPOGHUL, E. T., OKPE, I. J., & ANJANDE, G. (2020). A MACRO-ECONOMETRIC ANALYSIS OF TRADE OPENNESS, FOREIGN DIRECT INVESTMENT AND THE PERFORMANCE OF THE NIGERIAN ECONOMY. JOURNAL OF ECONOMICS AND ALLIED RESEARCH, 4(3), 1–24. Retrieved from http://jearecons.com/index.php/jearecons/article/view/172