Trade balance and economic growth: evidence from African countries

Clement Moyo and Rufaro Garidzirai

International Journal of Trade and Global Markets, 2022, vol. 15, issue 4, 497-515

Abstract: Does the trade balance influence economic growth? This question has sparked several views among academics. To contribute to this debate, the study employed the generalised methods of moments, feasible generalised least squares (FGLS) and panel granger non-causality test, to investigate the relationship between the trade balance and economic growth in African countries. The results of the study show that the trade balance is positively related to economic growth. Furthermore, the results also suggests that economic growth is a determinant of the trade balance. The authors recommend that African countries diversify their product structures and improve the competitiveness of their products to reduce imports of consumer goods which can be produced locally. Furthermore, imports should comprise mostly of intermediate inputs to enhance productive capacity. The study also supports the creation of trading blocs such as the African Continental Free Trade Area (AfCFTA), which will enlarge and diversify export markets, thus improving trade balances.

Keywords: trade balance; economic growth; panel data; economic integration; trade deficit. (search for similar items in EconPapers)
Date: 2022
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