A Causal Relationship Between Trade, Foreign Direct Investment and Economic Growth in Niger

Foreign direct investment and Trade were regarded as an important elements in enhancing economic development. This study used some time series econometric tests including the Augmented Dickey – Fuller (ADF) unit root test developed by Dickey – Fuller, stationary test developed by Kwiatkowski-Philips-Schmidt-Shin (KPSS), Johansen co-integration test and Granger causality test to analyse the connection between foreign direct investment, trade and economic growth in Niger. The tests results showed a bilateral relationship between trade and economic growth and a unidirectional causal relationship between trade and foreign direct investment with direction from trade to foreign direct investment. The long run effect tests revealed that trade has a positive effect on economic growth while foreign direct investment has a negative effect on economic growth in Niger. On average, ceteris paribus, the coefficients are statistically significant at 5% level.