The effects of international trade on economic growth in South Africa (2000Q1 to 2017Q2) and econometric view

Abstract

International trade has been identified by many economists to be an engine for growth and development. There has been an increase in the number of bilateral and multilateral trade agreements across the globe. Trade has gained significant attention among developed and developing countries and it hugely attributed to the impact of technology and globalisation. The study employs autoregressive distributed lag (ARDL) bounds testing approach to analyse The effects of international trade on economic growth in South Africa from (2000Q1 to 2017Q1) and economic review. The quarterly time series data from 2000Q1 to 2017Q1 is sourced from the South African Reserve Bank (SARB) and Quantec Easy Data. This study is envisaged to provide a better understanding on the relationship between South African economic growth and international trade. The findings brought light on how growth can be improved in South Africa. The unit root tests indicate a mixture of I(0) and I(1) variables which implied the employment of the ARDL approach. The cointegration model emphasizes the long-run equilibrium relationship between the dependant and independent variables. The findings reveal that exchange rate and import are positively related with GDP while one export is negatively related to it. The conclusion from this work is that there is correlation between GDP and its regressors. Since the results show that South African export have negative impact on growth, it is recommended that South African government must promote trading of goods and services internally and not focus much on exporting its primary goods and services abroad because it weakens the economy. It is recommended that South Africa must produce or export according to the need of the industry, so that the country benefit in return. Lastly, it is recommended that South Africa must support local industries and firms to create more employment opportunities and start programmes that will make youth to be active in businesses and reduce over reliance to the government.