DO FINANCIAL DEVELOPMENT AND TRADE OPENNESS MATTER FOR ECONOMIC GROWTH? PANEL EVIDENCE FROM SELECTED WEST AFRICAN COUNTRIES

Abstract

The study investigates the impact of financial development and openness to trade on economic growth in the selected West African West namely: Benin, Ghana, Niger, Nigeria, and Togo for the period of 2002 to 2023. The study employed cross-sectional dependence tests and the results from the panel unit root test found the mixture of I(0) and I(1). The Westerlund co-integration test confirms the existence of co-integration. After a Hausman test the Pooled Mean Group was utilized, and the result posits that foreign direct investment and financial development are significantly and positively impacted economic growth in the selected countries with coefficients 5.253and 2.600 and the probability values of 0.001 and 0.002 respectively. This suggests that the financial development and foreign direct investment has a significant impact on the economy, meaning that economic growth increase as financial development and foreign direct investment. While, trade openness on the hand, is negative -2.300 with probability values of 0.677, and statisticallyinsignificant, which indicates that increase in trade openness bring about a decrease in economic growth. The study recommends for appropriate financial reform that focuses on inclusive and efficient financial intermediation for economic growth. It also suggests that governments reform their institutions in order to liberalize the foreign sector, remove trade barriers, draw in investors, promote economic diversification for value-added exports, enhance trade partnerships with other countries, and reap the benefits of trade openness in West African countries