The Relationship between Trade Openness and Economic Growth: The Case of BRICS Countries

Abstract

Since their inception in 2006, the BRICS countries (Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa) have been fully committed to the strengthening and expansion of trade and investment ties between member states and the international world. However, it is important to empirically analyse whether the growth of these economies is driven by trade because the extensive trade -growth studies have yielded mixed and inconclusive empirical results. Therefore, this study is an empirical attempt to investigate the relationship between trade openness and economic growth in the BRICS counties by utilizing the Autoregressive Distributed Lag (ARDL) bounds test to cointegration and the Granger causality tests for the period from 1990 to 2017. The presence of a long run relationship between trade openness and economic growth is confirmed in this study. Evidence from the bounds test of cointegration indicate that there exists a bi-directional causality from trade openness to economic growth in the BRICS countries. Furthermore, this study provides evidence of a unidirectional causality between trade openness and output growth, particularly in the case of China.