Working Paper Series: Special Edition of 2016 to 2018 Interns

research. Rodriguez and Rodrik (2001) have cast some doubt on previous research conducted on the role of trade openness in economic growth. To elaborate, the authors cited problems with respect to how previous studies measured openness and the particular methodologies employed; for instance, inadequately dealing with the endogeneity issue. In addition, Awokuse (2008) noted that many early studies may have opted for methods such as ordinary least squares and simple correlation coefficient testing which would produce spurious results. This is due to the method’s inability to capture the dynamics of the data over time; for example, unit roots and cointegration. Expounding on the author’s point, Biswal and Dhawan (1998) and Richards (2001) argued that causality is a dynamic economic situation that needs to be modelled in a dynamic economic framework employing recently developed concepts such as unit root, cointegration testing and the VAR methodology. Few studies that investigated trade and the ECCU were captured by the work of the following. Labadie and Barnard (2016) examined strengthening trade relations with the emerging economy of Brazil. . George (2014) noted free trade policies are conduits for increased competition and innovation in the ECCU economies. 2.3 Openness and Growth The above literature considered the individual effects of FDI or trade openness on economic growth; however, in the proceeding sub-section a consideration of the impact of openness on overall economic activity is examine. Marelli and Signorelli (2011) cased the experience of China and India, and concluded that openness (FDI and trade openness) both have a positive impact on growth but, most importantly, have made these economies more competitive globally. More evidence from Asia has also concluded the positive link between an open economy and economic growth as found by the research of Marwah & Tavakoli (2004). In their study, they found that in the case of Indonesia, Malaysia, Philippines and Thailand that after these countries strategically focused on the opening of their economies they were able to achieve positive economic performance. This current research also seeks to understand the linkage between these variables. The literature has shown that there exists an interplay between FDI, trade openness and capital formation in spurring economic activity in a country. For instance, employing a panel methodology for

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