The relationship between openness, inflation and economic growth in Zambia from 1965 to 2015, an ardl Bounds approach.
Date
2019
Authors
Mulenga, Michael Bwalya
Journal Title
Journal ISSN
Volume Title
Publisher
The University of Zambia
Abstract
Using ARDL Bounds approach to cointegration, the present study, examines the relationships between openness, growth and inflation in Zambia for the period 1965 to 2015. The study fails to validate Romer’s hypothesis of a negative relationship between inflation and openness. It is found that the LR elasticity coefficient of inflation to openness is positive and weakly significant, at 6% level of significance. The positive relationship between inflation and openness is found to be more robust in the SR than LR. The results are consistent with cost push hypothesis (openness causes a faster rate of inflation). Additionally, the study finds a negative SR and LR relationship between inflation and economic growth and best explained by cost push theory of inflation. Lastly, a positive and highly statistically significant SR and LR relationship between openness and economic growth is found. Zambia being part of the global market, has benefitted from spillover of skilled labor; investments as well as technology to enhance
production capacity. The results of this paper are consistent with classical theories of trade and many others’ findings of positive relationship between openness and economic growth. The study recommends that the economic managers of Zambia’s economy should adopt such policies that promote openness so that inflation can be controlled in the LR, also leading to economic growth.
Description
Thesis of Master of Arts in Economics