Financial Openness and Economic Growth in Côte d’Ivoire: The Total Factor Productivity Channel

Abstract

This study analyses the influence of financial openness on total factor productivity (TFP) in Cote d’Ivoire to examine one of the channels through which financial openness affects economic growth. To this end, the study uses data from the Penn World Table (PWT) 9.1 and the World Bank over the 1984-2018 periods. By using Dynamic Ordinary Least Squares (DOLS) and Fully Modified Ordinary Least Squares (FMOLS) methods, the paper shows that financial openness positively affects total factor productivity in Côte d’Ivoire. Therefore, total factor productivity is one of the channels through which financial openness affects economic growth. This result calls for a series of measures to strengthen the competitiveness of the country to attract a large inflow of foreign capital and to boost the level of the TFP which is an engine of economic growth. Moreover, the results reveal that financial development, macroeconomic stability (as measured by the inflation rate) and domestic investment are important determinants of total factor productivity growth.