The Role of Trade in the Economic Growth of Sub-Saharan Africa
Posted: 12 Aug 2012
Date Written: July 2011
Based on the endogenous growth model on the importance of trade for economic growth via technological progress and using panel data from 44 SSA and 11 well-performing SEA economies over the period 1995 - 2006, our benchmarking empirical analysis claims to evidence the promising and independent roles of both exports and imports on SSA economic growth as they do in the benchmark region. Different from the usual claim, import is found to have superior growth effects to export; but, its effect is greater in the well-performing countries of SEA than SSA. Our empirical analyses also cast evidence on the crowding-out effect of FDI, with small magnitude and fragility; and, the causes of the divergent growth performance between the two regions to include the ineffectiveness of investment, macroeconomic instability and the severity of the adverse growth consequence of debt-burden in SSA relative to SEA. Hence, we suggest for SSA governments to favor trade, both exports and imports, followed by domestic investment more than FDI by creating conducive macroeconomic and investment environment.
Keywords: Growth, Exports, Imports, Panel Data, Benchmarking, SSA
JEL Classification: E22, F13, F43
Suggested Citation: Suggested Citation