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Growth effect of trade misinvoicing in Sub-Saharan Africa: the role of governance

Author

Listed:
  • Musibau Adetunji Babatunde
  • Joshua Adeyemi Afolabi

Abstract

Purpose - The growing volume of trade misinvoicing in Sub-Saharan Africa (SSA) calls for serious concern, particularly given its effect on macroeconomic fundamentals. Despite the growing body of literature on the growth effect of trade misinvoicing, empirical evidence on the role of governance in moderating the effect is quite scarce, particularly for SSA. The purpose of this paper is to provide insights into the growth effect of trade misinvoicing in SSA as well as the moderating role of governance in this regard. Design/methodology/approach - The feasible generalised least square estimator was applied to analyse relevant data, spanning 2009–2018, of 35 SSA countries. Governance indicators were classified into economic, political and institutional governance, and their individual role in moderating the nexus between trade misinvoicing and economic growth was explored. Findings - This paper showed the presence of cross-sectional dependence among SSA countries and long-run convergence of the estimated variables. The empirical finding showed that trade misinvoicing has a negative growth effect in the selected SSA countries, but both economic and political governance are crucial in lowering the observed negative growth effect. Practical implications - To curtail trade misinvoicing, SSA policymakers should go beyond just designing anti-money laundering policies to effectively implementing the policies for improved growth prospects. More so, the government of each SSA country must devise means of strengthening governance and building effective, accountable and transparent institutional frameworks that will constantly check and discourage trade misinvoicing activities. Originality/value - The originality of this paper stems from its novel assessment of the role governance plays in moderating the growth effect of trade misinvoicing in SSA using the feasible generalised least square estimator. It also details the strategies needed to effectively tackle trade misinvoicing.

Suggested Citation

  • Musibau Adetunji Babatunde & Joshua Adeyemi Afolabi, 2023. "Growth effect of trade misinvoicing in Sub-Saharan Africa: the role of governance," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 22(2), pages 241-254, May.
    • Handle: RePEc:eme:ijdipp:ijdi-01-2023-0004
    DOI: 10.1108/IJDI-01-2023-0004
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    Citations

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    Cited by:

    1. Afolabi, Joshua Adeyemi, 2023. "Advancing digital economy in Africa: The role of critical enablers," Technology in Society, Elsevier, vol. 75(C).
    2. Oluseyi Omosuyi, 2024. "Public And Publicly Guaranteed External Debt, Debt Servicing And Investment In Emerging Economies," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 69(240), pages 31-56, January –.

    More about this item

    Keywords

    Trade misinvoicing; Economic growth; Governance; Sub-Saharan Africa; Feasible generalised least square; C23; F21; N47; O43;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • N47 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Africa; Oceania
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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