Economic Effect of Globalization on Island of Mauritius: ARDL Bounds Testing Approach

Abstract

This study analyzes the effect of economic globalization on Mauritius from 1981 to 2019 using the ARDL approach. Due to their distinct economic characteristics, isolated island economies react differently to globalization than other countries. Our study investigates whether Mauritius's global trade and foreign direct investment (FDI) inflows have an impact on the country's GDP growth. The findings suggest that in the short run, FDI inflows are an impetus for the growth of GDP, while in the long term, the opposite occurs. Likewise, the long-term relationship between global trade and GDP growth concluded with the same result. In the light of our findings, the Government of Mauritius needs to focus on encouraging global FDI using various economic administrative measures and taking initiatives for enhancing the country’s global trade.