Documenting major drivers of trends in trade balance for SADC region amid the full implementation of the African Continental Free Trade Area (AFCFTA)

Phillip Mogashwa and Sehludi Brian Molele
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Phillip Mogashwa: Department of Social Science Education and Economic Management Education, University of Limpopo, Polokwane, South Africa
Sehludi Brian Molele: School of Economics and Management, University of Limpopo, Limpopo Province, South Africa

International Journal of Research in Business and Social Science (2147-4478), 2023, vol. 12, issue 3, 286-296

Abstract: This study scrutinises drivers of trade performance in the SADC region amid the full implementation of the African Continental Free Trade Area (AfCFTA). Where the short and long-run impact, through the Autoregressive Distributive Lag (ARDL) and forecasts through IRF of external debt, debt service cost, GDP per capita, Foreign Direct Investment (FDI), and Terms of Trade (TOT) on the trade balance is interrogated. In the long run, external debt, debt service costs, and GDP per capita negatively influenced the trade balance. TOT was found to be an insignificant predictor. This implies that these variables were among the significant drivers of trade balance while the impact of terms of trade is negligible in the region. FDI positively impacts regional trade balance, which informs us that it acts as a stimulus for trade in the area. Short-run results revealed that external debt and GDP per capita affected trade balance positively, while debt service costs, FDI and TOT were found to have a negative impact. IRF results showed that shocks from external debt and per capita GDP pose a positive instant impact, while shocks from FDI and TOT were proven to worsen the trade balance in the region. The region needs an FDI stimulus. Key Words:Trade Balance; Macroeconomic Variables, SADC; AfCFTA; Panel ARDL

Date: 2023
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