Acta Universitatis Danubius. Œconomica, Vol 14, No 7 (2018)

Abstract

The study examines the impact of foreign trade on economic growth in Nigeria and India as well as the direction of causality between foreign trade and economic growth in the countries. The study used Vector Autoregression method (VAR) and Granger causality test in estimating the data. The data used were sourced from United Nations Conference on Trade and Development (UNCTAD). Results of the VAR show that economic growth had positive and significant impact on foreign trade in Nigeria and India. The results further revealed that the direction of causality running from foreign trade to economic growth in Nigeria and India. The study concludes that foreign trade serves as a lubricant in further enhancing economic activities of the countries. Therefore, the government in the two countries should further open up their economies for international trade and put in place sound macroeconomic policies that will enable the countries to reap the benefit of foreign trade.