The Role of Trade in the Economic Growth of Sub-Saharan Africa

Posted: 12 Aug 2012

See all articles by Ambachew Mekonnen

Ambachew Mekonnen

Organization for Rahabilitation and Development in Amhara (ORDA)

Date Written: July 2011

Abstract

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

Mekonnen, Ambachew, The Role of Trade in the Economic Growth of Sub-Saharan Africa (July 2011). Available at SSRN: https://ssrn.com/abstract=2128009

Ambachew Mekonnen (Contact Author)

Organization for Rahabilitation and Development in Amhara (ORDA) ( email )

Kebele 13,
ORDA Head Office,
Bahir Dar, Amhara Region, P.O.B 132,
Ethiopia

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