The Impact of Trade Openness on Economic Growth in Afghanistan: "An Empirical Analysis (1990–2020)"
DOI:
https://doi.org/10.71082/wgf0bk63Keywords:
RDL Model, Cointegration, Economic Growth, Immiserizing Growth, Trade Openness.Abstract
This study investigates the complex relationship between trade
openness and economic growth in Afghanistan—a landlocked and
conflict-affected economy—during the volatile period from 1990 to
2020. While traditional economic theories often depict trade as an
"engine of growth," this research explores whether Afghanistan's
structural dependencies have led to a paradoxical outcome.
Adopting a descriptive-analytical approach, the study employs the
Autoregressive Distributed Lag (ARDL) model to capture short
term fluctuations and long-term equilibrium, supplemented by the
Bounds Test for cointegration. Empirical results, validated through
Jarque-Bera, Breusch-Godfrey, and Ramsey RESET diagnostic tests,
reveal a significant and negative long-term coefficient of -1.38 for
trade openness. This finding indicates that a 1% increase in trade
openness is associated with a 1.38% decrease in Gross Domestic
Product (GDP). Furthermore, the Error Correction Term (ECT) of
0.85 confirms a high speed of adjustment toward long-term
equilibrium following external shocks. These results suggest that in
the absence of a robust industrial base and institutional stability,
trade openness has led to "Immiserizing Growth" and "premature
deindustrialization," primarily driven by an over-reliance on
consumer imports and deteriorating terms of trade. The study
concludes that Afghanistan’s trade policy requires a strategic shift
toward "Smart Protectionism" and targeted capital import
substitution. Policymakers must prioritize enhancing technological
absorptive capacity and infrastructure to transform trade from a
source of structural dependency into a sustainable driver of
domestic productivity and economic resilience.
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