The Impact Of Trade,official Assistance And Remittances On Niger’s Economic Growth In The Context Of The Financial Crisis

Financial stability has become a critical concern for governments and policy-makers across the world.The damages of the previous global financial crisis witnessed on advanced economies,emerging markets and developing nations are the key reasons of this critical concern.Additionally,the number of financial crisis that occurred in the last decades is increasingly recognised as a serious,worldwide public issue.The theoretical literature and a sizeable number of empirical studies asserted that Trade linkages and capital flows such as Official(Development)Assistance and Remittance are among the macroeconomic shocks that mostly impacted the emerging and developing economies in times of financial crises.Evidence of how such macroeconomic shocks impacted the economic growth of a Least Developed Country(LDC)weakly integrated in the global financial system like Niger during the financial crisis is not documented in the literature.As such,this study set out to empirically examine the impact of Trade,Official Assistance and Remittance on the economic growth of Niger in the context of the financial crisis.The stationarity properties and the order of integration of the variable were first examined using the Augmented Dickey-Fuller(ADF)test.All the variables tested were stationary at first difference.Next,the ARDL bound test approach to co-integration was applied to test for the long-run relationship among the variables.The ARDL bound test indicated the existence of cointegration,suggesting the existence of a long run relationship among the variables.Given that the existence of cointegrating relationship was revealed among the variables,we used the ARDL-ECM which is the best and most efficient econometric method that estimates both the short-run and long-run causal relationship among variables of small sample size.The first objective of this study was to determine the impact of Trade,ODA and REM on the economic growth of Niger in the context of the financial crisis.The first objective of this study required a two-step analysis.The first step required determining if there was a causal relationship between Trade,Official(Development)Assistance(ODA),Remittance(REM)and Niger’s economic growth in the context of the financial crisis.The ARDL model revealed that there was a causal relationship running from Trade,ODA and REM to GDP both on the long run and short run,suggesting that Trade,ODA and REM operated as shocks of the financial crisis in Niger.The second step was to assess the impact of Trade,ODA and REM on the economic growth of Niger in the context of the financial crisis.The ARDL results indicated that a 1% decrease in Trade will decrease the economic growth of Niger by0.3125% and 0.3908% in the long run and short run respectively.We inferred from this finding that Niger was negatively impacted by the financial crisis via a decline in the export of raw materials to developed economies facing the turmoil of the crisis.In the case of ODA,the ARDL results indicated that a 1% decrease in ODA will decrease the economic growth of Niger by 0.6072% and 0.1796% in the long run and short run respectively.This also indicated that Niger was negatively impacted by the financial crisis via a cut in aid from donor economies facing the recession due to the crisis.Last,we observed that a 1% decrease in REM will decrease the economic growth of Niger by 0.166% and 0.0491% in the long run and short run respectively,suggesting that Niger was negatively affected by the financial crisis through a decline in remittance inflows and personal transfers from foreign residents facing adverse impact of the crisis in developed economies.This study also uncovered that in the key years of 2008,the economic growth of Niger declined by more than 8 percentage points(from 9.5% in 2008 to-0.9 in 2009)as a result of impact of shocks of the financial crisis.Additionally,results from the impulse responses and variance decomposition reinforced the conclusive findings of this study which indicated that Trade,ODA and REM all operated as shocks of the global financial crisis on the economic growth of Niger both on the long run and short run.Various robustness checks were implemented to guarantee the reliability of our research findings.On the basis of our research outcome,we offered several implications and recommendations(as the second objective of our study)that can be of benefit to the scholars,government and policy makers.Fundamentally,the government of Niger was encouraged to design and implement a fiscal stimulus package following the successful example of China by enacting various measures such as several investment programme,suitable monetary policies,tax cuts and the bailing out of state owned enterprises.On the other hand,considering the shocks by which the financial crisis impacted the economic growth of Niger,a number of recommendation was given in relation to the shocks of the financial crisis.First,the government of Niger should aim at diversifying its export of commodities in order to reduce its over-reliance on the export of few commodities and focus on few markets.Second,the government should reduce its dependency on foreign aid by developing various strategies and measures intended to generate funds domestically via diversified projects.Third,the government should aim to develop an environment conducive for populations develop opportunities and generate funds for themselves so as to be independent of personal transfers and remittance inflows which is subject of fluctuations in times of crisis.Fourth,the government should mobilise resources to properly fight terrorists and radical groups in order to attract foreign investors ready to invest in Niger and boost its economic activity.