The Impact Of Trade Liberalisation On Economic Growth Of Botswana

Botswana as a developing country exerts its efforts in various ways to maintain its economic development,one of which being participation in international trade.The country has signed several free trade agreements regionally,bilaterally as well as multilaterally for preferential market access of its goods and services.Several trade agreements have been concluded whose focus is to eliminate trade barriers for easier flow of goods between borders of Botswana and her trading partners.In light of this,the purpose of this paper is to analyze the impact of trade liberalisation on the economic growth of Botswana using Gross Domestic Product(GDP)as proxy and further determine the nature of the relationship of the two concepts.Moreover,the research will conduct an analysis on the relationship between trade liberalisation and other economic growth indicators.Trade liberalisation models considered in undertaking this research include the Neoclassical Model;Solow-Swan Model;Endogenous Growth Model;AK model and Innovation-Based Growth Model.These models as well as OECD economic growth indicators aided in selection of variables for this exercise.A total of fourteen variables were selected and a time series data from 1980-2016 was sampled for analysis.The dependent variable in this model is GDP while independent variables are constituted by the Real Effective Exchange Rate(REER)as the trade liberalisation indicator as well as other economic development indicators.The correlation research techniques that were used for the study included the Johansson Cointegration Test,Vector Error Correction Model,and Vector Error Correction granger causality,Impulse Response as well as the Variance Decomposition.The outcomes of the research have revealed that there is a relationship between trade liberalisation and economic growth in Botswana.The Johansen Cointegration test confirmed the correlation matrix results by affirming that there is constant interaction between the economic growth indicators identified.The test vehemently rejected the null hypothesis with significant probability of less than five percent of the required threshold.On causality score,the Granger Causality test score undertaken on variables has shown that trade liberalisation on its own cannot cause economic growth however on aggregation with other economic indicators a growth may be caused.Government should increase its ventures on infrastructure development as noteworthy attention has been placed on social intervention programmes.This would strike a balance between social intervention programmes and infrastructure development to increase the nation's gross capital formation that is declining.Furthermore,the Government has to balance between its import consumption and the private sector thus,reducing the rate of private tenders in order to increase the percentage of imports variance due to government.Although the GDP percentage change as a result in the change in the Human Capital Index is increasing,however much more needs to be done in the area of copyright protection regulations as well as encouraging education in Information Communication Technology(ICT)to boost innovation.This will increase the level of professionalism in various industries and many others captured in detail in this paper.