Trade liberalisation and economic growth link: The case of Southern African Custom Union countries

Numerous studies have examined the relationship between trade liberalisation policies and economic growth. However, existing studies have largely ignored Southern African countries despite some of them having performed admirably across a multitude of development metrics over the last few decades. This study attempts to close this gap by conducting an empirical research on the free-trade-growth link for five Southern African countries; Botswana, Lesotho, Namibia, South Africa, and Swaziland. The auto-regressive distributed lag (ARDL) framework that we use in the bound testing cointegration process enables us to obtain both the short-run and long-run impacts of trade liberalisation policies on economic growth. Two distinct trade liberalisation indicators are used in this paper resulting in two distinct empirical economic growth models for each country. Model 1 uses the average tariff rate as a proxy for trade liberalisation while Model 2 uses the trade ratios as the proxy. Results from both models suggest that compared to the other four countries, South Africa has clearly benefited from its trade liberalisation policies both in the short-run and the long-run.