COMPLEMENTARY FACTORS IN THE TRADE OPENNESS-GROWTH NEXUS: EVIDENCE FROM SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) COUNTRIES

Abstract

Trade openness is broadly acknowledged as a critical determinant of economic growth; however, discussions continue regarding its associated benefits and drawbacks. These ongoing debates often arise from analyses that assess its aggregate influence on growth without adequately accounting for the contextual conditions that modulate its effects. This underscores the necessity of considering complementary factors within the trade-growth discourse, as such an approach clarifies the prerequisites an economy must satisfy for trade openness to meaningfully foster economic expansion. Consequently, the present study investigates the influence of trade openness and its accompanying variables on economic growth across sixteen Southern African Development Community (SADC) member states over the period 1980–2019, employing the pooled mean group (PMG) estimation method. The empirical evidence reveals that, in the long term, trade openness exerts a directly positive and statistically significant effect on economic performance. Furthermore, the analysis identifies a noteworthy moderating role played by intermediary variables in the relationship between economic growth and trade openness. This finding suggests that the efficacy of trade policy within SADC economies is not solely dependent on openness itself, but also on the presence of conducive complementary conditions. Based on these insights, the study offers policy recommendations aimed at enhancing growth outcomes through strategic engagement with trade.