Commercial opening, domestic investment and economic growth in Ecuador. Empirical research 1950-2019
Abstract
The theory of growth has paid attention to domestic investment and to the commercial opening of economies with the rest of the world as key factors to explain the evolution of growth. The main objective of this work is to analyze the cointegration relationship, the short and long-term dynamics and the causal links between domestic investment, trade openness and economic growth in Ecuador in the 1950-2019 period. The work is explanatory level with empirical research design. An empirical model of growth estimated using the autoregressive distributed lag (ARDL) bounds test approach and the Granger causality test is presented. The results found indicate that there is a long-term cointegration relationship between investment, openness and growth, according to the ARDL bounds test, in Ecuador. Investment and openness have a positive and significant impact on income and growth, in the short and long term. However, the analysis of the Granger causality analysis indicated a unidirectional process that goes from openness towards investment and income, while the hypothesis of non-causality in both directions between investment and growth could not be rejected. It is concluded that, as a consequence, the analysis implies that this economy must continue its efforts to open up to international markets, both via exports and imports.
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