Capital Account Liberalization and Growth in the WAMZ: An Empirical Analysis

  •  Ngozi Egbuna    
  •  Emmanuel Oniwoduokit    
  •  Kemoh Mansaray    
  •  Marshall Umo    
  •  Adedapo Adenekan    


The paper employed recent time series econometrics to analyze and determine relationships between capital account liberalization and economic growth in the West African Monetary Zone2 (WAMZ) for the period 1980–2012. For the purpose of clearly ascertaining the impact of the variables of interest on economic growth, a country by country estimation was carried out. The short-run and long-run relationships between capital account openness and economic growth were investigated by applying the autoregressive distributive lag (ARDL) bounds testing approach suggested by Pesaran et al. (2001). The empirical results of the ARDL models showed a significant positive relationship between capital account liberalization and growth in Ghana and Sierra Leone. This suggests that the removal of restrictions on capital accounts in Ghana and Sierra Leone would promote economic growth in these countries in the long-run. Liberalization had positive and significant impact on growth in Ghana even in the short-run. However, there was no significant long-run relationship between liberalization and growth in The Gambia, Guinea, Liberia and Nigeria, implying that opening of the capital account should be gradual and complemented with sound macroeconomic and financial policy. Overall, the diagnostic tests indicated that our ARDL models were stable.

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