Ahmed, Abdullahi D, Cheng, Enjiang and Messinis, George (2008) The Role of Exports, FDI and Imports in Development: New Evidence from Sub-Saharan African Countries. Working Paper. Victoria University, Melbourne, Australia.

Abstract

The disappointing economic performance of Sub-Saharan African (SSA) economies in the late 1980s prompted economic-wide policy reforms in the early 1990s. The primary objectives of these institutional and structural changes were to promote trade and export activities, enhance foreign direct investment (FDI) inflows, and ease foreign access to SSA markets particularly for large multinational enterprises associated with more advanced technologies and better managerial and organizational practice. This study focuses on the effect of exports, FDI and imports on economic growth in SSA, using the new autoregressive distributed lag (ARDL) approach and Pedroni estimation procedure which also allows for heterogeneity across individual countries. It is found that exports and FDI have significant impact on economic growth. Granger-type causality tests show the interrelatedness of exports, FDI, imports and income variables. The results also provide some evidence of existence of a two-stage causal chain of exports, imports and income. The paper calls for more market-oriented policy changes in SSA countries to create a liberal environment for foreign trade and FDI.

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