Does Trade Openness Promote Economic Growth? The Case of Sudan

Abstract

This study investigates the impact of trade openness on economic growth in Sudan. The study utilizes annual time series data from 1972 to 2019. The study adopts the unit root test. The Autoregressive Distributed Lag model has been used as an estimation technique. The results indicate that trade openness has a positive significant impact on the economic growth in short run. However, the impact is negative in the long run. When the long-run and short-run elasticity were compared the trade-led growth hypothesis was not found. It can be argued that the country is specialized in production of low-quality products and exporting primary products therefore the economic growth is negatively affected by trade openness. Moreover, the Environmental Kuznets Curve hypothesis results provide evidence against the existence of the hypothesis indicating that the country is still below the desired level of income. The study suggests that a country should promote the industrial sector which will help to export manufactured products and therefore will increase the productivity.