This study however, empirically examined the impact of tariff rate on trade openness in Nigeria, relying on annual time series data spanning the period 1985-2016 and using the Engel-Granger two step co-integration test to establish the existence of a stable long run equilibrium relationship among the variables at a 5% level of significance
The debate over the effect of tariffs on trade openness is relatively virgin in international trade literature The study employed the Ordinary Least Square (OLS) regression technique and the pairwise granger causality test to validate the nature of the relationship existing between trade openness and tariff rate in Nigeria. Sequel to the regression result, it is found that although tariff variable is statistically insignificant, it has a negative effect on the degree of openness. Similarly, the granger causality reveals a uni-directional causality existing between TOPEN and TARF running only from trade openness to the rate of tariff.
The study therefore recommends that since TARF has proven to be an insignificant determinant of trade openness and is thus granger caused by the degree of openness, the government should leave tariff rate to be determined by the invisible hand of the free market-economy and not bother in fixing the tariff rate for the purpose of restricting the free flow of international trade.
Table of Contents
CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND TO THE STUDY:
1.2 STATEMENT OF THE RESEARCH
1.3 RESARCH QUESTIONS
1.4 RESEARCH OBJECTIVES
1.5 RESEARCH HYPOTHESIS
1.6 SIGNIFICANCE OF THE STUDY
1.7 DELIMITATION OF THE STUDY
CHAPTER TWO: SURVEY OF RELEVANT LITERATURES
2.1 CONCEPTVAL FRAMEWORK
2.2 THEORETICAL LITERATURE
2.2.1 TRADE THEORIES
2.2.1.1 THE MERCANTILIST TRADE THEORIES (1500-1600)
2.2.1.2 THE ABSOLUTE ADVANTAGE TRADE THEORY (1776)
2.2.1.3 THE COMPARATIVE COST ADVANTAGE THEORY (1817)
2.2.1.4 THE HECKSHER-OHLIN MODEL (1819 – 1833).
2.2.1.5 THE NEW GROWTH MODEL (1980’S)
2.2.2 THEORIES OF TARIFF
2.2.2.1 THEORY OF OPTIMUM TARIFF AND RETALLIATION
2.2.2.2 THEORY OF CUSTOM UNION
2.3 EMPIRICAL LITERATURE
2.3.1 FOREIGN STUDIES
2.3.2 DOMESTIC STUDIES
2.4 SUMMARY, LIMITATIONS OF PREVIOUS LITERATURE AND VALUE ADDITION
CHAPTER THREE RESEARCH METHODOLOGY
3.1 ANALYTICAL FRAMEWORK.
3.2 MODEL SPECIFICATION
3.2.1 MODEL ONE FOR OUR PRIMARY OBJECTIVE
3.2.2 MODEL TWO FOR OBJECTIVE TWO
3.3 ESTIMATION TECHNIQUE
3.4 METHOD OF EVALUATION
3.4.1 ECONOMIC CRITERIA: A PRIORI EXPECTATIONS
3.4.2 STATISTICAL CRITERIA: FIRST ORDER TEST
3.4.3 THE ECONOMETRIC CRITERIA: THE SECOND ORDER TEST
3.5 The Pre-tests
3.5.1 Stationarity Test
3.5.2 Co-integration Test
3.5.3 Error Correction Test
3.6 SOURCES OF DATA
3.7 Software Package
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF REGRESSION RESULTS
4.1 DESCRIPTIVE ANALYSIS
4.1.1 TIME SERIES PLOT OF THE DATA AND THE TREND ANALYSIS
4.2 PRE-ESTIMATION TEST
4.2.1 THE UNIT ROOT TEST RESULT
4.2.2 ENGLE-GRANGER TWO-STEP CO-INTEGRATION TEST RESULT
4.3 PRESENTATION OF THE ORDINARY LONG RUN STATIC REGRESSION RESULTS
4.4 INTERPRETATION OF THE REGRESSION RESULTS BASED ON THREE SELECTED CRITERIA
4.4.1 ECONOMIC CRITERIA: A PRIORI EXPECTATION
4.4.2 THE STATISTICAL CRITERIA (FIRST ORDER TEST
4.4.2.1 THE COEFFICIENT OF DETERMINATION (R2)
4.4.2.2 TEST OF STATISTICAL SIGNIFICANCE (THE T- TEST STATISTIC, F-TEST STATISTIC AND THE STANDARD ERROR TEST)
4.5 THE SECOND ORDER TESTS
4.5.1 THE NORMALITY ASSUMPTION
4.5.2 THE ASSUMPTION OF NO SERIAL CORRELATION
4.5.3 TEST FOR HETEROSCEDASTICITY
4.5.4 TEST FOR THE PRESENCE OF MULTICOLLINEARITY
4.6 THE SECOND MODEL FOR OBJECTIVE TWO
4.6.1 THE RESULTS OF THE GRANGER CAUSALITY TEST
4.7 EVALUATION OF WORKING HYPOTHESES AND ECONOMIC IMPLICATUONS OF THE FINDINGS
CHAPTER FIVE: SUMMARY, POLICY IMPLICATION, RECOMMENDATION AND CONCLUSIONS
5.1 THE SUMMARY OF THE STUDY
5.2 POLICY IMPLICATION OF THE STUDY
5.3 CONCLUSION
5.4 RECOMMENDATIONS OF THE STUDY
5.5 LIMITATION OF THE STUDY AND SUGGESTION FOR FURTHER STUDIES
Research Objectives and Key Topics
This research aims to investigate the relationship between tariff rates and trade openness in Nigeria using annual time series data from 1985 to 2016. The study seeks to determine if tariff policies significantly affect economic openness and to identify the causal direction between these variables through empirical econometric analysis.
- Impact of tariff rates on trade openness in Nigeria.
- Direction of causality between tariff and trade openness.
- Empirical evaluation using the Engel-Granger two-step co-integration test.
- Analysis of trade policy shifts in the Nigerian economy.
- Assessment of macroeconomic variables including inflation (CPI) and exchange rates.
Excerpt from the Book
1.1 BACKGROUND TO THE STUDY:
The unending long debate in international economic theory and history has always been on free trade and protectionism. Consequently, it is not so impossible to argue that the exact link between openness or free trade and long-run economic growth has posed so much difficult issues that are being explored in variety of ways in both practical and theoretical terms. Usually, the most contending question in international economics (Eco 341&342) is; Do open economies grow faster than closed ones? This question is still left for economic historians to contribute as there has not been any widely convincing answer for it. In fact, even the past classical and neo classical economics could not provide answers to this question because it requires a global approach that only general equilibrium and recent developments in game theory can provide. So, an economic history approach may present empirical findings that will challenge theoretical analysts to stir new solutions.
This disturbing scenario was as a result of the Smithian and Ricardian conclusions reinforced by the Hecksher-Ohlin theorem that recommends openness/ free trade as the best commercial policy because of its favourable impact on welfare and growth of the trading partners. Moreover, Stolper-Samuelson’s theorem corroborated the above trade doctrine by pointing to an increase in the compensating reward for scarcer productive factors in-free trade context. Against this theoretical atmosphere, economic commentators may ask why so many times and in so many countries governments use protectionist policies if free trade and openness were so positive twelfare and growth? Unarguably, it may be tenable that political lobbying may underscore protection because of the redistributive effects on revenue that are involved in the afore-mentioned specific factor models. Hence under this schematic episode, trade liberalization provokes losses in all productive factors associated with import competing sectors against other immobile factors.
Summary of Chapters
CHAPTER ONE: INTRODUCTION: Provides an overview of the debate between free trade and protectionism and outlines the research questions and objectives regarding the Nigerian economy.
CHAPTER TWO: SURVEY OF RELEVANT LITERATURES: Reviews historical trade theories and existing empirical studies on tariffs and trade openness to identify gaps in current research.
CHAPTER THREE RESEARCH METHODOLOGY: Describes the analytical framework, including the OLS estimation method, model specifications for the primary and secondary objectives, and the pre-tests conducted.
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF REGRESSION RESULTS: Presents the descriptive statistics, unit root tests, co-integration results, and the long-run static regression findings.
CHAPTER FIVE: SUMMARY, POLICY IMPLICATION, RECOMMENDATION AND CONCLUSIONS: Summarizes the study's findings, discusses policy implications, and offers recommendations regarding future tariff management in Nigeria.
Keywords
Tariffs, Trade Openness, Nigeria, Economic Growth, Protectionism, Ordinary Least Square (OLS), Granger Causality, Trade Liberalization, Exchange Rate, Consumer Price Index, Co-integration, Import Substitution, Macroeconomic Variables, Trade Policy, Time Series Analysis.
Frequently Asked Questions
What is the primary focus of this research?
This research investigates the empirical impact of tariff rates on trade openness in the Nigerian economy, specifically covering the period from 1985 to 2016.
What are the central themes of the work?
The work explores the tension between free trade and protectionism, the theoretical foundations of trade theories, and the practical implementation of tariff policies in developing nations like Nigeria.
What is the primary research objective?
The primary objective is to investigate the nature of the relationship between tariff modalities and economic openness, specifically determining how tariffs affect the trade-to-GDP ratio.
Which scientific methodology is employed?
The study utilizes the Ordinary Least Square (OLS) regression technique for the main analysis and the pairwise Granger causality test to determine the direction of causation between the variables.
What topics are covered in the main body?
The main body covers theoretical frameworks (Mercantilism, Hecksher-Ohlin, etc.), empirical literature reviews, model specifications, and diagnostic econometric tests (stationarity, co-integration, normality, and serial correlation).
Which keywords define this study?
Key terms include Tariffs, Trade Openness, Nigeria, Economic Growth, Ordinary Least Square (OLS), and Granger Causality.
How did the study handle the issue of collinearity?
The researcher performed a correlation matrix analysis and used variance inflation factors, concluding that while some collinearity existed between certain variables, it did not pose a significant threat to the OLS results.
What was the key conclusion regarding tariff impact?
The study found that while tariff rates have a negative relationship with trade openness, they were not statistically significant determinants of trade openness in Nigeria over the study period.
What is the direction of causality between trade openness and tariffs?
The Granger causality test revealed a unidirectional causality running from trade openness to the tariff rate, suggesting that openness dictates tariff policy rather than the reverse.
- Quote paper
- Ugwuja Chinonso Oliver (Author), 2018, The Impact of Tariffs on Trade Openess in Nigeria From 1985 to 2016, Munich, GRIN Verlag, https://www.grin.com/document/503047
