Does international trade promote economic growth? An evidence from Brunei Darussalam

Abstract

Purpose The purpose of this paper is to explore the potential impact of trade openness on economic growth for the economy of Brunei Darussalam. Design/methodology/approach Empirical analyses are conducted using the autoregressive distributed lagged model (ARDL) procedure and the data used were spanning from 1989 to 2018. Findings The obtained results indicated a positive and statistically significant relationship between trade openness and economic growth. Similarly, the results also revealed that domestic investment and natural resources positively impacted economic growth. Further, this paper found that human capital has impacted economic growth both negatively and significantly, which is against the prior expectation. Moreover, in the short-run, trade openness and domestic investment have lost its significance level while all other variables have maintained both their significance levels and signs of their coefficients. Practical implications This paper has provided comprehensive evidence regarding the relationship between trade openness and economic growth for Brunei Darussalam. Therefore, the policymakers of Brunei are suggested to take practical steps to gear up trade liberalization, and hence attain higher growth. Further, a favorable attention is also needed toward economic diversification and encouraging domestic investment to accelerate the long-run economic growth. Originality/value As this is a comprehensive study on the economy of Brunei Darussalam, therefore, this paper expects that the policymakers would find it useful while formulating and exercising suitable policies related to trade openness.